Cluster Family Office Blog

It is common for human beings to have a distorted perception of reality. We are just that subjective and easily influenced – what can you do? And whilst the financial media constantly talk about inflationary fears and we structure our investments so that imminent hyperinflation does not erode the value of our assets even further, we often forget to look around us.

If we take a step back and look at the bigger picture, what we see is a bleak deflationary scenario. There is virtually not a single expansionary macroeconomic indicator, and almost all the ratios are below zero. GDP, CPI and employment are three highly significant indicators of what is currently happening across almost the entire world. Below is a chart showing changes in US payrolls over a three-month period, expressed as an annualised rate:

If we bear in mind that inflation is usually lower than the figure used for pay rises, it seems clear that 2009 has plunged headlong into deflation. Why are the official CPI figures less deflationary? Well, because the items that carry the greatest weight – and which depend on the state – are being artificially inflated at breakneck speed to prevent a free fall in prices. Only first-round inflation, triggered by a rise in oil prices – which hit us hard last summer – can mask the fall in prices that is already looming on the horizon. And this deflation is here to stay as long as the massive cash injections fail to fill the bottomless pits of the debt that has been created. Only when that happens will we see inflation rise, which may well quickly turn into hyperinflation. You can read Ethan Block’s simple but useful explanation of inflation:

http://vimeo.com/moogaloop.swf?clip_id=2782169&server=vimeo.com&show_title=1&show_byline=1&show_portrait=0&color=f5cc38&fullscreen=1

The Inflation Monster – Episode #4 from The Way to Build Wealth on Vimeo.

It is vital to realise the importance of investing wisely, even in times such as those we are now beginning to experience, when deflation increases the purchasing power of our assets. But be careful: this applies only to those assets that are protected against a loss of value. And this concept is of the utmost importance, as our clients are well aware. We are facing a period in which making our investments and structuring our wealth correctly, with sound advice, will have a multiplier effect in the coming years. Unfortunately, however, the opposite is also true, and in fact very few people are managing to protect their wealth from loss of value. Most take mental refuge in the hope that this nightmare will end, so that everything can go back to the way it was before. But what many refuse to admit is that the way things were before was a dream.

The strategies for managing wealth in deflation and inflation are, logically, very different, and it is disastrous not to be able to distinguish the correct decision at any given time. Government cash injections (machines for printing money, but not for earning it) have so many zeros after them that it seems as though deflation’s days are numbered. But hyperinflation is probably not as close as some people think. And to flood the desert, it will take a massive injection of funds, and for longer than some realise. As things stand, the world is in deflation, with all that this entails, and with an exceptional opportunity at our fingertips for our wealth to grow spectacularly.

According to the tabloid newspaper The Sun, a gang of five elderly men have cruelly tortured their stockbroker in Germany. They are aged between 60 and 79, and have no known aliases, although their grandchildren call them yayos.

They invested around 2.5 million euros in a booming property market in Florida. James Amburn, their American investment adviser based in Bavaria and owner of Digitalglobalnet, invested all their money in brand-new property developments, property deals and buy-and-sell transactions that generated, at the very least, capital gains equivalent to two lifetimes’ worth of salaries. I believe there were also people in Spain who got involved in this and stopped working, whilst mocking those who weren’t getting ahead like them. Some also did the same with shares…

But let’s get back to our «dear old folks». They waited for their victim as he left a café, and if James had known he was going to bump into them head-on, he would have gone out the back door, or would have «bent down to pick up a pencil from under the table», as our dear Carola. There were those old folks again, asking him what was happening with their investments in Florida. Oh!How awful! -thought James- It’s remarkable how well someone younger than them understands that that’s just how the markets work – that sometimes you lose and sometimes you win. And these apprentices at Cocoon They’re really going to town on it… as if their children – who are just like vultures – weren’t going to squander it all anyway. Anyway, making the best of a bad situation, James greeted them with a cordial «How's it going, lads? Out for a bit?«.

The response was a blow with the bumper of one of the elderly men’s Audis, which immobilised James long enough for them to subdue and abduct him. They kept him locked up for four days in one of their homes, with his hands and feet bound. The torture, beatings, death threats and cigarette burns were a constant nightmare. The elderly men thought that Amburn it was a A shoddy version of Madoff, and that by torturing him they might get their money back. But that wasn’t the case. James is not an alleged fraudster (and if he is, he has the resilience of a true professional), but an alleged unscrupulous adviser, like so many others. We can see him in this photo after being released by the police:

After four days of hell, during which he was given nothing but a couple of bowls of soup to keep him conscious, James has let his customers down, yet again. He told them that if they wanted their money back, they would have to let him send a fax to his bank in Switzerland, where allegedly had the money from his grandparents, who, allegedly He never invested in Florida. Naturally, that letter alerted the police, who raided the house and arrested: Roland (74) and his wife Seiglinde (79); Gerhard (63) and his wife Iris (66), both retired doctors; and a certain Willy, aged 60, the youngest of the group. All of them face a 15-year prison sentence for kidnapping and torture.

Their lawyers will have to be court-appointed unless the children – those «vultures» – see fit to pay for a good private defence for their parents, in the face of accusations from the person who has deprived them of their inheritance.

These things really make you think, don’t they?

Vamos a hablar exclusivamente de la parte financiera del patrimonio. Por una vez, y sin que sirva de precedente. Vamos a centrarnos sólo en las inversiones en bolsa y del futuro, más incierto que nunca, al que se enfrentan los inversores.

El escenario actual de los mercados es y será en los próximos años convulso como nunca. Y en los tiempos que están por venir va a ser muy habitual ver ascensos meteóricos de formas de inversión (sectores, estrategias, tipología de gestión, técnicas de trading…), y también batacazos espectaculares y fracasos de fondos y gestores que se demostrarán incompetentes ante el nuevo mundo (que ya advertimos en 2007) de la inversión. Y es lógico, ya que para ver llamas hay que echar leña. Para que algunos obtengan buenos resultados sostenidamente (por ejemplo en IICs) o crezcan sobresaliendo como inversores (como Buffet), otros muchos deben quedar en la mediocridad y otros deben ser borrados del mapa a medida en que las multiburbujas, que se van a crear con las ingentes inyecciones de dinero arrojadas al ruedo, vayan explotando aquí y allá.

Vamos a ver en los próximos años la cruda realidad que demostró el experimento montecarlo and that sólo los verdaderamente grandes consiguen superar de forma sostenida en el tiempo. Quedarán en evidencia las miserias producidas por la popularización de fondos gestionados por incompetentes, ya que cada pequeña gestora bancaria y no bancaria ha creado en los últimos años sus propios fondos de inversion con «lo mejorcito» de sus limitadas plantillas. Gestor@s con cierto brillo en épocas de bonanza pero limitados en capacidad y experiencia (algunos de ellos, no todos), que quedarán en lastimosa evidencia en estos tiempos tan complejos que se avecinan. Todos ellos con pistolas cargadas en sus manos que, en algunos casos, acabarán con los ahorros de aquellos que confiaron en el falso brillo de su mediocridad durante estos locos últimos 20 años (comparables a los felices años 20). No en balde casi todos los clientes de banca han oido alguna vez en boca de su banquero frases del estilo: El fondo que me pides pertenece a una plataforma distinta de la que trabajamos (o no está disponible, o tiene comisiones demasiado costosas, etc…), pero tenemos otro igual o mejor que te va a encantar.

La popularización de inversores self-made, autodidactas, avalanchas de cursos y publicaciones, formación y pseudo-formación inversora de todo tipo, y la globalización de todo ello a través de internet, a pesar de beneficiar en algunas honrosas excepciones, ha hecho y seguirá haciendo el resto. Resultado de este fenómeno a medio plazo: Triunfarán los Mejores en mayúsculas, los que disponen de los grandes gestores estables con históricos de pata negra, metodologías rigurosas a prueba de ciclos y agilidad y olfato brillante. Sólo los verdaderamente Grandes en el más extenso sentido de la palabra van a poder permanecer durante los próximos años en los respectivos primeros cuartiles. Y esa ley universal de permanencia sostenida a largo plazo en primer cuartil, va a ser más clarificadora que nunca en un escenario convulso como el que tenemos ante nosotros.

De ellos fue el pasado y, sobre todo, de ellos es el futuro. ¿Pero de todos ellos? No. El mundo ha cambiado en muchos aspectos, y existen también diversas razones para preveer que el core del éxito futuro cambie de manos más de lo que cabría esperar. Por ejemplo:

• La popularización de los ETFs, que provocan la homogeneización del comportamiento de las grandes, medianas y pequeñas empresas en bolsa. De la llamada estrategia «me too» podemos ver un claro ejemplo en este gráfico: iShares Russell 1000 Index (IWB), iShares Russell 3000 Index (IWV), iShares S&P; MidCap 400 Index (IJH), iShares Russell Midcap Index (IWR) y finalmente iShares S&P; SmallCap 600 Index (IJR).
• La oferta y la demanda: Cuando los inversores institucionales y ETFs se concentran en big-caps, es más difícil para los stock-pickers «de autor» conseguir el éxito en el reconocimiento de su valor. Al menos es más lento, aunque por otro lado también se popularizan los grandes fondos value con política de stock-picking.
• Los resultados y los sistemas se acortan en el tiempo debido a la globalización de la información. Podríamos decir que la ineficiencia del mercado disminuye proporcionalmente con la popularización de los screenings o del mayor número de Perros del Dow (Dogs of the Dow). Aunque yo preferiría pensar que precisamente esas y otras popularizaciones son las que hacen al mercado ineficiente respecto a la correcta búsqueda de Valor. ¿Qué fue antes, el huevo o la gallina?
• Un entorno depresivo podría reducir (o al menos diferir) las probabilidades de éxito de los que lo obtuvieron con una estrategia buy & hold en épocas expansivas.
  
• Por otro lado una larga recesión económica bien podría ser un escenario óptimo para la búsqueda más competente de Valor.
  

En definitiva cambios sociales que afectan al mundo de la inversión. Pero parece claro que la globalización crea más y más interferencias incontrolables en los sistemas puristas tradicionales. El que pondere más imponderables, el que se mueva mejor en medio del caos, tendrá el futuro en sus manos. Pero en un campo minado como el que tenemos ante nosotros, es mejor ir de la mano de uno de los Grandes que seguir a un mediocre al que Montecarlo le dió su minuto de gloria antes del verano de 2007.

There are almost a thousand ETFs which are available on the market, catering to all tastes and in all sizes. But the most influential players in the market are, of course, those with the largest asset volumes. Here are the top 10:

Recently we have seen how Pau Gasol managed to reach the top in the world of basketball. Watching news about this achievement, I happened to come across the film: «The whites don't know how to put it in«which is a basketball movie in which two hustlers try to pull off the heist of their lives.

Today we won’t be talking about wealth management, though we will be discussing Wealth with a capital W. It is a sad day, and yet we won’t be discussing the crisis. Today is a day for reflection, taking a perspective that goes beyond the the bigger picture which we have mentioned so often in our articles. Today is also a sad day as we mourn the loss of someone truly special.

A wonderful person has passed away tonight: Vicente Ferrer. They will never beatify him like they did homonym (and so the Church will once again be shown up), but I cannot find the words to pay sufficient tribute to this man, who is more committed than anyone else to those in need. Fifty years devoted exclusively to helping the poorest and most needy in the most remote and destitute region of India, Anantapur. A caste, the untouchables or Dalits, who are relegated to the most extreme marginalisation. That is where Vicente Ferrer arrived 50 years ago, at the very heart of marginalisation, where the need was greatest. His work, and that of all the donors, has ensured that today the Vicente Ferrer Foundation serve as a model of cooperation.

He popularised sponsorship in the most sensitive and effective way, and today more than 2.5 million people depend on the work of his team. These are staggering figures that should make us all feel ashamed when we compare them with what we have done for those most in need. Personally, I believe that rarely has a Nobel Peace Prize been more justified. A man who, as one would expect, donated all the income he received from his many honours and awards to the same cause.

Fortunately, his wife and partner Ana Ferrer, his son Moncho, and his nephew Jordi Folgado Ferrer will carry on with the work for as long as we all wish. I leave you with a message from this wonderful team on this very sad day for humanity:

Continuing to observe the behaviour of banks in these critical times, we have come across several very curious and significant cases in which solvent customers are strategically mistreated. Let us explain this with an example, fictitious of course:

«Don Solvent Entrepreneur (E. S.) must renew a credit policy of your company ERE, S.A. on its usual bench, the Molculo Bank. The amount is €1 million at annual Euribor +1.5%, which had always been guaranteed with the company's own buildings and installations. ERESA, valued at almost double that amount. The company has reduced its workforce in 2008 and 2009 (as the more astute among you will have already guessed), but it is still standing with a dignity envied by most. With much reduced profits but without losses and with good prospects of a merger with another company in the sector, a strategic alliance that would leave the group in a position of clear competitive advantage. The current circumstances and prospects are, therefore, among the best that can be found in the business world today. In other words, a good old-fashioned bank customer.

Well, Don E. S. cannot understand why this year, his banker and friend S. M. (Soyún Mandao) explains to him that the conditions have been tightened due to new management in the bank's risk department. For the renewal of the policy, the bank is demanding collateral for the warehouses, installations, machinery, the fleet of trucks, the adjacent land, the not so adjacent land and his personal villa. A total value, which even in this day and age, more than quadruples the €1 million policy to be renewed. But that's not all, the rate to be applied for the renewal of the bloody policy is now 7%! (they are ashamed to index it to the Euribor and round it off by hand).

Solvent Entrepreneur cannot believe that the Molculo Bank, its long-established bank (although a few years ago it was called Muntiro Bank), is doing this to him. Y I am only repeats the assigned mantra: «I'm sorry Empren, The risk managers have become inflexible, there's nothing I can do. Many are not even being given the option to renew their policies... You know what it's like, what can I tell you».

Of course, E. S. is not going to pledge all his assets for a 1 million policy, let alone at 7% per annum! So he decides to visit the director of the Jeando Bank, recommended by a good friend. There he gets a policy for 600.000′- at Euribor +2,25% guaranteed by the warehouses and facilities of ERESA. He also goes to the plodding and almost pre-retired director of the Mopueden Bank, who had so often proposed to his father good conditions for his father to ERESA (when it was still called E. Solvente e Hijos, S.A.). There he gets 400.000′- € more at Euribor +2%, secured only with the land adjacent to the company.

Finally Empren (he's almost like family now, isn't he?) manages to return the policy within the deadline to the Molculo Bank, that this is the end of its commercial relationship with ERESA. Surprisingly (or not), however, he maintains his personal relationship with I am, The Solvente and the Mandao have even been spending their summer holidays together for years.

One day, while sharing the third tinto de verano (a traitor if ever there was one) and some boquerones (anchovies) at a beach bar, I am he commented absentmindedly to Empren that the risk managers were renegotiating debts left, right and centre with business clients in distress, some even in a pre-insolvency situation. That they had no other solution than to refinance policies, with hardly any guarantees and in demolition conditions, if they did not want to eat more real estate and uncover more bad debts than the Bank of Spain was willing to ignore. And while they were asking for the fourth round, he began to indiscreetly and recklessly tell him about the case of the 1.2 million euro policy renegotiated for a company named Ebitdapena, S.A.....»

This is just a humorous example of what today's hard-pressed banks are doing. Due to the inability to release asset operations with customers in the red, they have no choice but to release ballast through solvent customer debt. In other words, they mistreat solvent debtors to the point of forcing them to transfer their credit operation to other institutions. It does not matter how solvent or profitable this good customer has been, is and will be in the future. After all, what bank today cares about the future? A few months or years ago, a customer like our friend Solvent Entrepreneur, was a treasure for any entity. And yet today the priority is bailing water and coefficients, balancing balance sheets and defaulting on payments by hammering. In short, surviving at the cost of whatever.

It has always been said: «If you owe the bank 1 million, the bank has you on the hook. If you owe the bank 1 billion, you are the one who has the bank on the hook.«. Well, it is clear that this maxim is an understatement. And today, the banks are not only caught not only by the debtors of 1 billion but also by the defaulters of small and medium-sized mortgages. It is the power of the anthill next to a large, seriously ill and dying prey.

That's how bad banking is, gentlemen. Of course, this doesn't happen to one's own bank, it always happens to other people's banks, whether or not they are in the list of the downgrades massive.

Continued from Exclusión Social y Show Business (1).

En este escenario trágico en el que la necesidad social comienza a desbordar países como España, ex-candidato reivindicativo de octava potencia mundial (sic). En el que el entorno PIIGS, cae en el vacío de sus propios excesos, en el mismo corazón de una UE más convulsa, tensionada y cuestionada que nunca. En este panorama que hemos definido, de repente, vemos noticias pertenecientes al mundo del show business como la del fichaje de dos futbolistas por 158.000.000′- € que ni siquiera garantizan el éxito deportivo. Excesos que deben hacer reflexionar a cualquier ser humano y que personalmente me resultan inconcebibles, inoportunos, inmorales… increíbles. Igual de reprobables que los de cualquier otro exceso económico-deportivo, de cualquier color, en el entorno actual de constricción social y negro horizonte.

Incluso en el absurdo mundo del show biz, hay maneras y maneras de entretener en tiempos de depresión, sufrimiento y exclusión social. Se ha demostrado que se puede ganar todo formando futbolistas desde la base, y en los tiempos que corren es más que nunca un deber invertir por la productividad y el I+D propio, también en la búsqueda de talento deportivo. No se trata sólo de no incrementar la burbuja de crédito (562 millones de euros debe el club blanco), como podréis ver en este excelente artículo de GurusBlog y que también se está llevando por delante las economías de muchos clubes. Sino también de tener, o al menos fingir, cierta conciencia de las dificultades ante las que se encuentra la sociedad española y la humanidad en su conjunto. Se trata de donar, hoy más que nunca, mucho más que 10 millones de $ a una organización como Unicef en 5 años, y por supuesto dejar radicalmente de promocionar the apuestas y exportar y dilapidar para siempre 158 millones debidos en 5 semanas. Se trata de entretener en el mundo del showbiz sin rebasar los límites de la ética que la miseria social se está encargando de sensibilizar y acotar, aunque muchos sigan mirando hacia otro lado.

El exceso absurdo en estos tiempos supera récords, tal y como cita La Voz de Galicia en this article:

«Florentino Pérez, que en su primera etapa al frente del Real Madrid (seis temporadas), se gastó 499 millones de euros en fichajes, ya ha consumido 159, una cifra nunca alcanzada en una temporada por el club blanco y que supera la mitad de los 300 que, según anunció, obtendría de créditos.»

Otras voces eminentes como la de Xavier Sala i Martín, ante las cifras de tal despilfarro, se cuestionan:

«…Álguien le tendrá que dar dinero y sería bueno que lo explicara. Cómo puede ser que a un equipo de fútbol le dejen todo ese dinero, teniendo en cuenta la actual situación económica del país y la política de restricción de créditos que están siguiendo todos los bancos…»

Los cuatro fichajes más caros de la Historia del Fútbol los ha protagonizado el Real Madrid (Cristiano Ronaldo, Zidane, Kaká y Figo). La objeción es cuando menos ética, al menos mientras el Titanic se mantenga a flote por sí mismo y sin ayudas encubiertas ni tratos preferenciales corporativos. Pero que el primero y el tercero se hayan producido en plena recesión global y con un deterioro social en España jamás vivido, es mucho más que inoportuno.

A los excluídos sociales simpre les quedará el desquicio del show business para evadirse de su triste realidad, pero esta locura económico-deportiva, sea del color que sea, en plena debacle social me parece de una bajeza moral denunciable. No es esto, no. Entretener así, no.