'100% Return' on Stocks in 10 Years?

This headline (Jim Bogle via CNBC)is designed to make the mouth of every red-blooded investor water. But what is easily overlooked iJs that behind this attention-grabbing number is the mundane fact that any holding doubling over a period of ten years would have provided an annualised return of 7 percent. While this is nothing to sneeze at - many investors would give their right arm to be able to achieve this performance - it also is not earth-shattering. Above all it reminds us that just a short period of under - or even negative - performance can make it nearly impossible to achieve this return over a period of ten years as any loss has to be made up before the clock starts ticking again in the investor's favour. So the avoidance of mistakes and maximum discipline in keeping the costs of portfolio management as low as possible should be foremost in investor's minds.

Meagre Performance for Private Banking Clients

Private Banking clients find it notoriously difficult to obtain meaningful performance comparisons. Private Banks or Wealth Management departments are reluctant do showcase their performance. To some extent they are justified by arguing that each client requires a different approach as the risk tolerance or tax situation varies in each case. On the other hand, this can easily be used as a smokescreen to disguise poor performance before or after the client engages the firm. The solution for this dilemma should really be that fund management firms offer model portfolios that clients can choose if they are happy with the parameters that are set out in the investment rules for these model portfolios. Clients would then have a choice between a quasi-discretionary approach or a standardised formula that can be subjected to stringent performance evaluation. A look at this survey conducted by a magazine in Austria offers a shocking insight into the poor performance that clients experienced during the past 10 years. Most of the managers just were able to scrape together an annualised performance of around 3-4 per cent. Interestingly it made little difference whether to portfolio was deemed to be 'conservative' or 'dynamic'.

10 Common Investing Mistakes

10 Mistakes that turn Investors into their own worst Enemies (Business Insider)

Swiss Banks client Gold to allocated accounts

The banks are reported (Financial Times) to suggest to clients to move their physical gold holdings to allocated accounts. These gold holdings then are no longer part of the bank's balance sheet and do not require costly equity capital to back it up. To a certain extent this increases the safety of the client's gold holdings as any bankruptcy of the bank would no longer have any detrimental impact on the client's claim to ownership of the gold (assuming the physical gold is segregated properly - which is not always the case as several recent cases in the UK demonstrated where client holdings of various assets were not properly segregated). Investors should be aware, however, that banks (and other custodian institutions) might at any moment be prevented from giving access to gold that is in their custody if the governments/regulators order them to do so.

Honest Rating Agency punished by regulators

It is possible that rating agency Egan-Jones has not followed regulatory guidelines (themselves of questionable value) but to be banned from a large sector of the market for what is the equivalent of a parking offence seems to go to far - even if one never can underestimate the deviousness of regulators and the financial establishment that seems to dictate its actions. So readers are warned if they think that bond ratings  are anything they should pay attention to.

Who will drive Lamborghinis?

Interesting paper extolling the advantages of Gold (or hard currency) in times of (Hyper)Inflation

Where should you hold your Gold?

Still convinced that Gold is always a safe haven? then look at this

Turkish banks are pushing their customers to deposit physical gold in 'gold deposit accounts'. While that may seem to be a convenient - and above all secure - option it negates one of the main reasons why people want (and should) hold a proportion of their wealth in the 'barbarous relic'. This is the fact that gold is not anyone's liability (like all bank deposits, bonds etc) and is not just a blip in some distant computer (as most holdings of shares and bonds are after paper certificates have fallen victim to 'rationalisation' and 'modernisation'). Physical gold - as long as it is held in secret and away from the prying eyes of governments - is the only asset that can survive in stormy times and depositing it in any institution or vault - even if anonymous - means that its main advantage in uncertain times is lost.
12 Jun 2012

Heads I win, Tails you lose

A potential source of fraud that most investors do not know much about concerns the allocation of trades. It is critical that investment advisors or fund managers are not able to allocate winning trades to favoured accounts or funds - or even to their own investment accounts. A recent example is found here (Los Angeles Times)

2013 Investment Outlook

The only thing I will say about the Investment Outlook for 2013 is a warning. Rather than listen to the countless experts that will volunteer their free advice in the media you should first of all have a good look at their past performance. Checking their track record is no sure way to profits in the future but at least it will help you to weed out the 'Talkers' from the 'Doers'.

How reliable are Fund Ratings?

When rating analysts at Morningstar give the thumbs up to nearly two-thirds of the funds they review it appears that their firm may be "less fund watchdog, and more fund lap dog." (MarketWatch Annual Lump of Coal Awards). Off-the-Shelf ratings are no substitute for independent advice and evidence that is based on actual investment performance without undue emphasis on 'subjective' judgements.