By Brocken Inaglory. How to Catch an Investment ‘Wave’? Get in the Water!
At the beginning of the summer, I always start singing (or humming) some Beach Boys song as my own personal soundtrack to this glorious and seemingly carefree season. The song “Catch a Wave” has particular significance – not because I’m a surfer, but because one of my investing mentors once used surfing as analogy for me.
As he liked to explain, surfing requires a good measure of patience, perseverance, skill and luck. It also requires action – you can’t decide which wave to catch while you’re standing on the beach, holding your board. By the time you make your choice and race into the water, that wave will have either crashed down upon you or passed on to shore. In order to catch a wave, you have to pursue it. You must already be in the water, paddling, watching for opportunities. You might miss a couple before you catch the perfect wave to find yourself “sitting on top of the world,” as the Beach Boys ditty goes.
Investing also Requires Action
Like surfing, investing is a dynamic activity. If you try to time your entry from the sidelines, you run the risk of either missing the wave, chasing it endlessly or perhaps worse – being crushed by it.
Allow Me Some Latitude with this Analogy . . .
Your board is your ballast, the investment ‘core’ or foundation that you hold onto while you await a good wave. It should contain a diversified mix of instruments that are in line with your risk parameters to help generate, grow and sustain income over time.* A professional financial advisor can help you make those choices.
Your buoyancy is assisted by the mild paddling you do to float atop the water. This represents the monies you either add or reinvest as part of your ongoing investing activity.
The waves are the outside forces that drive the valuations of these instruments – and your ‘core’ – higher and lower, depending on the moods of the economy and the markets.
Oceans, like investing markets, have changing moods and tides. As the saying goes, ‘a rising tide lifts all boats.’ The same has been said about good financial markets. But if you are in the water long enough with the proper ‘board’ (diversified ballast), you have the opportunity to catch a wave!
So, remember to take action. Take yourself – your “Little Deuce Coupe” – to the beach and try to “Catch a Wave!”
The BMW Group debuted the series version of its innovative electric vehicle, the BMW i3, simultaneously in New York, London and Beijing on Monday. “Innovation drives change. The i3 is more than just a car. It’s a revolutionary step towards sustainable mobility. It is purpose-built around an electric power train to serve the needs of our megacity customers,” said Chairman of the Board of Management of BMW AG, Norbert Reithofer, at the world premiere in New York on Monday.
The BMW i3 – the BMW Group’s first pure electric series-produced model – has the same sporting genes as every BMW and is characterised by sheer driving pleasure. Sustainability is a priority throughout the entire BMW i3 value chain: “The BMW i3 sets a new benchmark for sustainable mobility in all stages of development and production, as well as aftersales,” said Friedrich Eichiner, Member of the Board of Management of BMW AG, Finance, at the unveiling of the BMW i3 in Beijing.
Range of 130 to 160 kilometres generally quite sufficient
Low running costs and strong global interest
BMW i3 sets a new benchmark in lightweight construction
Sustainability throughout the value chain
Global market for electric vehicles likely to exceed 150,000 vehicles in 2013
The BMW Group is the manufacturer of automobiles and motorcycles in the world with its BMW, MINI and Rolls-Royce brands. As a global company, the BMW Group operates 28 production and assembly facilities in 13 countries and has a global sales network in more than 140 countries.
By Laitche. Most Institutions are Abreast of Changes and Ready to Comply with FATCA
The wealth management industry has experienced many changes in recent years, especially in new rules and regulations, something which Steven L. Cantor, Managing Partner of Cantor & Webb, knows quite well, as he has been legally representing and advising high net worth families for 35 years; he has guided and directed those families in the process of complying with multiple tax and regulatory obligations, as well as providing advice on wealth planning.
For Cantor, changes in regulatory matters that are occurring now are causing the business to become increasingly transparent, in clear reference to the FATCA law, a rule orchestrated by the U.S. government which seeks to combat international tax evasion, which is estimated at USD 40,000 million annually.
Therefore, Cantor stresses that private bankers, in their advisory roles, are more aware than ever that clients must be current and meet their respective jurisdictions.
Most institutions are ready
Regarding FATCA, Cantor believes that most of the institutions are ready, as long they know what lies ahead and how to act in order to stay abreast of changes. He says that in the current context what will change is the transparency. “The world changes, just as the rules and regulations that apply change, and in the case of this particular sector is a major breakthrough because it will provide great transparency.”
Steven’s advice to wealth advisors is to keep abreast of regulatory changes and new regulations, but above all, to provide the client with the possibility of putting themselves in the hands of a professional who specializes in the area of tax planning and who may legally advise the client, which eventually avoids many problems.
Regarding the type of client company, Cantor says the typical customer is Latin, “the matriarch or patriarch of a family, with one foot in America and another in Latin America and who is looking to plan their wealth from both a legal and a taxation point of view; structuring their assets to comply in all respects with the tax offices of both the USA as well as that of their respective country.”
Another very common situation is the client who comes from Latin America to reside in the United States, and who was born in the United States but has never before lived in the United States and either did not feel the need, or did not know, that as an American citizen they had the obligation to comply with the U.S. treasury. “When they come here and settle is when the problem begins. They are dual nationality citizens, and they require complex advice”.
FIBA Private Banking Conference in Miami in September
Steven L. Cantor, Managing Partner at Cantor & Webb, who is also a partner of FIBA, talks about the upcoming private banking appointment that FIBA will hold in Miami on the 16 th and 17 th of September, a meeting which will have a large audience, and which will be represented by over 75 financial institutions and professionals from Latin America, Europe …
“As a member of FIBA, I am very pleased to see how FIBA assumes a very active role in understanding, educating, and providing ideas and opportunities for the industry in a very interesting format of working panels which allow to make the most of these conferences.”
In September, Cantor will act as moderator in the panel: “How has asset management and wealth planning evolved in an era of greater fiscal transparency?” The speakers will be Arturo Giacosa, head of Fiduciary and Hispanic Market Wealth Planning, Itau International Private Banking, Stephen Liss, director of Wealth and Investment Management at Barclays Americas and Klemens Zeller, wealth advisor at JP. Morgan.
Wikimedia CommonsBy Arend Vermazeren. China Property: A Tough "Bubble" to Pop
I recently came across an old newspaper article from February 1989 that described Beijing’s residential property “bubble,” with average selling prices then of about US$430 to US$510 per square meter. The article went on to say that, given that the average college-educated worker typically saved less than approximately US$13 per month, at those prices, it would take a century or so to be able to buy a two-bedroom apartment. The writer concluded that a housing bubble was underway.
These days, the official average Beijing home price has reached a new high of approximately US$3,800 per square meter (or about US$246,000 for a small one-bedroom apartment) despite strict home purchase restrictions. In terms of affordability, consider that last year, China’s average annual take home pay per person for urban households was approximately US$3,900. China’s property bubble has been a hot topic probably ever since the beginning of the country’s commodity housing development. But despite some compelling arguments and striking examples that a bubble does exist, China’s property market has generally remained robust. So, is its property market really in a bubble? If so, why has the bubble lasted so long?
Real estate in the country’s urban areas is expensive by traditional metrics. But the average income has also more than tripled over the past decade. While true wages may not continue to grow at double-digit rates, by the same token, it may be too soon to jump to the conclusion that there is a real estate bubble while incomes continue to shift upward.
No doubt that China has some poorly planned large-scale projects developed. Like the U.S., China is a vast country filled with many contradicting examples. Observers could reach opposing conclusions about the U.S. property market by narrowing in on areas such as San Francisco or Detroit. To generalize about China’s market can be equally misleading.
In previous commentaries on China’s housing market, we have noted that the typical down payment requirement for first time home buyers is a hefty 30%, and usually 60% for a second home. Unlike in the U.S., mortgage loans in China are recourse loans. As a result, a homeowner cannot expect that any remaining debt can be forgiven should he or she not be able to continue payments. So the systemic risks are very different than those the U.S. faced in recent years.
So what factors have underpinned the property bull market over the years? The main driving force for the development of property market has been actual demand for urbanization and home upgrades. Some investors are really concerned over the rate at which people in China may be buying multiple properties for investment. Chinese are famous for having high savings rate—as high as about 50%. However, the country’s investment alternatives are currently limited, and low bank rates have meant that keeping money in the bank has been a sure way to lose purchasing power. China’s domestic equity markets are also notoriously volatile. In addition, given the steady appreciation of China’s currency, the renminbi (RMB), over the past decade, the incentive for investing in RMB assets has become more appealing. Buying real estate, therefore, has been one of the few alternatives available for people to preserve wealth and purchasing power, especially in light of the typically low costs incurred for housing investments, or carrying costs. In China, so far only two cities, Shanghai and Chongqing, have implemented experimental property tax programs. The low carrying costs also help explain why some flats sit vacant—the need to find rental income is much less pressing than it might be in the U.S. where you have to cover higher mortgage costs and property taxes.
Although China’s property market certainly exhibits some bubble symptoms on the surface, the root cause seems deeply embedded in China’s economic growth and financial system. The government has proposed different measures over the years to tackle property inflation, but the efforts have been largely unsuccessful as they only temporarily suppress the symptoms. With continued wage growth and urbanization, China’s property market may be a tough “bubble” to pop.
Henry Zhang, Portfolio Manager at Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Wikimedia CommonsBy Micah MacAllen. María Jesús Hume Hurtado, New CEO of MBA Lazard In Peru
MBA Lazard, a leading Latin American investment bank, announced that María Jesús Hume Hurtado has been appointed CEO of MBA Lazard in Peru, effective immediately.
Alejandro F. Reynal, Chairman of the Board of Directors of MBA Lazard Holdings said that “María Jesús (Mayu) will bring major benefits to our clients in Peru and across the region. Her wealth of corporate expertise and knowledge of international business will offer our clients in Peru a unique approach and will complement the strong team that we have built in the region.”
Ms. Hume said: “I have great respect for MBA Lazard and I am drawn to its talented professionals, strong presence in Latin America and its ethos of independence. We are in the midst of a pivotal moment in the Peruvian economy. It is an attractive country in which to invest and conduct business, and I believe that MBA Lazard is in a unique position to support our clients in making the most of opportunities and confronting the challenges facing the global economy head on.”
Mayu Hume has more than 30 years’ experience in leadership roles within the public and governmental sectors and is currently serving on various boards of directors at top-ranking firms and non-profit organizations. Ms. Hume is Chairwoman of the Board of Directors at AFP Integra, one of the main pension fund administrators in Peru. Previously, she was the Managing Director and Business Manager at the ING Group in Peru and Colombia, and for 2 years, was the Deputy-Minister for Trade at the Ministry of Economy, Finance and Trade. Ms. Hume studied industrial engineering and economics at the Pontifical Catholic University in Peru.
Since the opening of its Lima office in 2008, MBA Lazard has enjoyed strong growth and a high degree of success for its clients. The past 12 months have seen MBA Lazard participating in the main local and cross-border mergers and acquisitions involving Peruvian-based firms. This includes providing advice to: Alicorp in the acquisition of Industrias Teal; Grupo Breca in the sale of Soldex to Colfax Corporation; Banco de Crédito del Perú in the acquisition of Correval Sociedad Comisionista de Bolsa in Colombia, and San Martín Contratistas Generales in its sale to Empresas ICA, to name but a few.
AllianceBernstein, announced that Nina Tannenbaum has joined the firm as Managing Director of Alternatives sales and client services. Tannenbaum will work with AllianceBernstein’s growing alternatives team to further build out its diverse product offerings as well as service the complex needs of clients to integrate alternatives into their current investment portfolios and risk profiles. Tannenbaum will report to Joel R. Stevens II, Senior Managing Director and head of Institutional Investments.
“With so many firms today competing to build a presence in alternatives, our ability to continue to attract top talent demonstrates that our services are resonating with the industry,” said Stevens. “Nina brings a diverse alternatives background to the group and will be an integral part of our efforts to continue to meet the growing demand among clients for alternatives products and risk aware solutions.”
Tannenbaum joins AllianceBernstein from Napier Park Value Fund, where she was Director of Marketing and Product Management. Prior to this role, Nina held positions at The Blackstone Group’s Alternative Asset Management division, J.P. Morgan & Company and the National Basketball Association. She holds a bachelor’s degree from Columbia University and a master’s degree from the MIT Sloan School of Management.
By RitaLPGarcia . JP Morgan will Analyze Strategic Alternatives for its Physical Commodity Business
JP Morgan Chase & Co announced that it has concluded an internal review and is pursuing strategic alternatives for its physical commodities business, including its remaining holdings of commodities assets and its physical trading operations.
To maximize value, the firm will explore a full range of options over time including, but not limited to: a sale, spin off or strategic partnership of its physical commodities business. During the process, the firm will continue to run its physical commodities business as a going concern and fully support ongoing client activities.
J.P. Morgan has built a leading commodities franchise in recent years, achieving a top-ranked revenue position. The business has been consistently named as a top client business in Greenwich Associates’ annual client surveys and was recently named Derivatives House of the Year by Energy Risk magazine.
Following the internal review, J.P. Morgan has also reaffirmed that it will remain fully committed to its traditional banking activities in the commodity markets, including financial derivatives and the vaulting and trading of precious metals. The firm will continue to make markets, provide liquidity and offer advice to global companies and institutions that have, for years, relied on J.P. Morgan’s global risk management expertise.
Wikimedia CommonsBy Jikatu. The Raid and Search on Royal Bank of Canada in Uruguay has already led to the outflow of funds to other centers
The raid and search proceeding conducted a few weeks ago at the offices of the Royal Bank of Canada in Uruguay by Argentine judge Norberto Oyarbide, has caused a chain reaction and a lot of fear among the more than 10,000 Argentine clients with offshore private banking accounts in the neighboring country possessing an average of $600,000, and also amongst customers in other countries, as reported by the Uruguayan newspaper El Pais.
Some of these clients, Argentineans as well as clients from other nationalities, whose accounts are found in offshore institutions operating in Zonamerica, have already requested for their funds to be transferred to accounts abroad for fear of the recurrence of raids like the one requested by the Argentine judge on 13th June.
Judge Oyarbide requested authorization from Uruguayan authorities to conduct the operation. It so happens that the Argentine judge is in charge of a mega cause in which he is investigating millionaire money laundering maneuvers through the transfer of dozens of footballers.
As for the chain reaction and fear experienced by Argentine and foreign clients with capital in institutions operating within Zonamerica, El Pais newspaper says that according to a source who asked not to be identified, that after the raid “Argentine clients as well as clients from other countries are calling with much concern and some have specifically asked for their accounts to be withdrawn from Uruguay and taken them somewhere else …. It is not easy to be able to tell the customer that he shall not experience any problems because they have all the documentation.
“Putting myself in the shoes of a bank customer in Zonamerica, I understand how this has created suspicion and uncertainty about whether the bank is making available to third parties any information regarding their account, their name and their movements, and people do not want anything to do with that”, said the same source.
In Zonamerica, Uruguay’s most extensive free trade zone, there are currently about 60 banks and investment advisory firms in operation, including local and foreign banks which can only serve foreign clients and bank representations operating as a link between potential investors and the central office of institutions located outside the country.
We must bear in mind that customer funds in Zonamerica are not actually in Uruguay, since they use the country as “booking”, as the money is actually in bonds, stocks or funds in Switzerland, USA, Germany, Austria and Singapore.
The advantage of establishing within this zone is that it is a territory which is exempt from any taxes, and where companies do not have to give the Uruguayan state explanations of any kind, neither about invoicing nor about their customers, whilst it benefits the country as an employment generator.
Argentineans have deposits totaling 2,663 million dollars which are currently in Uruguayan accounts, as 71% of the 3,751 million dollars of non-resident accounts are Argentinean. The paper highlights that 90% of that money has been declared in Argentina and that only 10% would not be, according to financial market estimates.
Wikimedia CommonsManuel García Ospina. Are Emerging Markets Vulnerable?
It sounds harsh to say that emerging markets can be highly vulnerable. Especially since they have experienced a big boom in recent years, which has led to the suggestion that we are in a world in which emerging markets are of a different kind to those we knew years ago. Such terms such as BRIC, CIVETS, etc., allowed the “developed world” to look at them with different eyes. But today, at the prospect of a reduction of monetary stimulus, some weaknesses have been laid bare.
During the past 10 years, the total government debt in local currency of all the emerging markets combined, went from about 1.5 trillion dollars to almost $ 6 trillion, representing an average growth of 30% per annum which, compared with the economic growth over the same period which averaged 5% annually, shows a marked imbalance between how emerging markets got into debt, and the positive impact such indebtedness may have generated.
We might think that this increase in local government debt went hand in hand with an effective reduction of other forms of indebtedness, which, unfortunately, did not. Both public and private debt, boomed during the last 10 years, fueled by low global interest rates and excess liquidity. Proof of this is that between the period 2008-2013, the emerging markets have received about USD 300 billion, while the debt issued, has been of USD $ 292 billion.
The above sounds like finding oil in Arabia, which means, that wherever funding was seeked, there it was. However, the last few years may show a blurred picture of what happened in real emerging market crises. Let’s put it bluntly: after the Asian crisis, emerging markets have not had any deep crises. They may have had strong distortions, as in the period 2001-2003, which included Argentina’s default, but acute, never. So, that is why it becomes so important for financial sector analysts to start looking into a science that very few people like: economic history.
History will tell us that before July 2, 1997(the day in which the Asian crisis officially began),Thailand’s picture was very similar to the following: higher cash flows from Japan and Europe, which financed anything, including local financing institutions, real estate speculation as a whole, a stock market which had been highly dynamic in previous years, a highly overvalued currency, and the ‘allegations’ of its authorities that the capital flows which were entering were the result of direct investment , which reduced their vulnerability, because they were not portfolio flows.
At the same time, Thailand began to increase its imports, and due to external factors, its industry, especially its technology industry which was the bastion of its economic prosperity, experienced a fall in the price of the products it sold, almost overnight. Clearly, that led to a situation in which the dollars that entered Thailand ended up paying for its imports, and widening the current account deficit.
Would it sound similar if we said, that instead of a fall in the price of technology there was a fall in the price of basic goods? Actually, although market analysts prefer to talk about VIX, CDS and Ebitda multiples, they should watch the level of certain variables such as the current account deficit, which is extremely boring. And they should establish whether Thailand’s indicators in many variables, such as in the level of savings, among other things, are similar to those of some emerging countries today. They may be surprised at what they find. Hedge funds are familiar with this, as they were in 1997, but with one big difference: the leverage which may be achieved today may be much larger than that of 15 years ago.
Wikimedia CommonsFoto: Bill Ingalls. ING IM lanza un fondo crédito multi-estrategia
ING Investment Management launched the ING Renta Fund First Class Yield Opportunities with currently assets of EUR 35 million (USD 46,5 million). The fund seeks to deliver attractive returns by investing in a diversified multi-strategy credit portfolio.
The First Class Yield Opportunities strategy combines the skills of three key investment teams, the Multi-Asset, Credit and Emerging Market Debt boutiques. The strategy profits from ING IM’s proven bottom-up credit selection skills of the various specialized teams as well as the top-down asset allocation skills of the Multi-Asset boutique.
Ewout van Schaick (Head of Multi-Asset strategies) and Roel Jansen (Head of European Investment Grade Credit) act jointly as lead managers for the fund, setting the investment policy and the top down allocation over asset classes. The individual bonds are selected by ING IM specialized teams for investment grade credit, global high yield and emerging market debt. The fund volatility is monitored and can be scaled down depending upon market conditions, which makes it a risk-controlled investment.
Hans Stoter, Chief Investment Officer at ING Investment Management: “Global credit markets have proven to be an attractive investment over time and can be an attractive diversifier for a government bond oriented fixed income portfolio. Returns across global credit markets as well as returns over time deviate significantly which illustrates the importance of dynamic asset allocation. The need to fully understand the issuers and issues and to select the bonds with the most favourable estimated risk-adjusted returns requires analysis by credit specialty teams. The new First Class Yield Opportunities Fund combines our knowledge and experience in all of these fields.”
The strategy focuses on bonds that offer an attractive yield taking into account an estimate of the inherent risks. In order to be able to meet its return and risk objectives, the portfolio managers have the possibility to allocate in a flexible and dynamic manner between the various credit markets, with a strong focus on bottom-up instrument selection, top-down allocation and downside risk management.
