Cluster Family Office Blog

Before you start booing me, I promise you that my colleague gfo will publish the reply to the riddle in a couple of days. By the way, there are over thirty comments, and they’re all brilliant. That said, let’s move on to something else.

I’m sure you’ve all read the article by José Mª Díaz Vallejo in which he discusses a topic that is as little-known as it is unpopular: considering and setting the return target for our investments in the markets over the course of our lives. He very aptly calls it Personal Benchmark, and defines it as «the annual return target based on a longer-term target«. Simple, yet vital and by no means obvious. As this issue relates to the evolution of a person’s wealth throughout their lifetime, it forms part of the standard analysis we carry out as a Multi-Family Office. José Mª, would you mind if we ran a few thought experiments based on your concept? Here we go:

We usually hear the word benchmark associated with fund managers, indices, charts, etc., and we equate this with target a target to reach or exceed. But JMDV applies this wisely to his own investment profile:

• Beating inflation in the long term (4%)
• Developing a pension plan with a 40-year time horizon
• Start-up capital
• Time remaining (40 years)
• Dividends
• New regular contributions

Based on these variables – which only he himself and the passage of time can clarify and refine – he estimates that he will need an annual return of 8–9% over 40 years to reach his Personal Benchmark desired. Let us consider this benchmark as an example type of a 25-year-old, but which could be extrapolated – with a few adjustments – to any of us if we imagine it in our own terms.

Let’s move on to the experiments now and explore this concept of personal benchmark: First of all, let us consider that regular contributions not only can, but must to grow at an accelerating rate in line with our professional and career development, or even our potential future inheritance, if any. We must also bear in mind that our personal development will likely mean we are unable to maximise our contributions. In other words, over the years we will probably share our lives with partners, buy property, possibly support children… and perhaps even become parents ourselves.

We do not know what the future holds. Perhaps our career progression will be meteoric or mediocre, or perhaps our health will be poor. Family circumstances will also affect the growth of our wealth: for example, we may need to set aside substantial sums of money for personal and/or healthcare for elderly relatives. Or we may have to rescue our nieces and nephews from destitution because of the foolishness of our dim-witted brother-in-law. All these variables – which also change over time – force us to constantly adapt our personal benchmark.

Another factor to bear in mind is happiness: in other words, it is not only our personal development that will prevent us from maximising our regular contributions to wealth growth. We must also find happiness along the way. After all, it will be of little use to us to be the wealthiest yet most embittered pensioners in our circle, however eager our descendants and heirs may be, hungry for property and fresh cash. Our financial and wealth growth throughout our lives must allow us to strike a balance between financial optimisation, happiness and well-being – a balance that only we are capable of intuiting and shaping.

Savings/Investment and Happiness/Well-being are not always interconnected, as one might think. It is true that most of us tend to go to extremes when allocating resources in the pursuit of happiness and well-being. Such excesses often result in our financial progress becoming increasingly mediocre over time. And because of this mediocrity, as the years go by, we will be forced to recklessly increase our personal benchmark. The consequence of this is that we take on fatal risks, which, at best, will cause us to build up and lose wealth cyclically throughout our lives, thereby turning our lifetime financial progress into a financial rollercoaster. But at the other extreme, sometimes the massive concentration of resources for reinvestment and the pursuit of our benchmark, causes us such distress and unhappiness that we will be unable to achieve a stable personal life. This personal, family and social unhappiness will also have a negative impact on our ability to create wealth, thereby also hindering the personal benchmark designed.

The ideal balance is personal and unique to each individual, and can only be achieved by masters of life. Furthermore, only the final result determines whether we succeed or fail, and during our youth we will have no indication that would allow us to make adjustments based on interim results. As my favourite quote on the sidebar of our blog says: «…we don’t learn to live until life is gone».

We are also going to introduce other types of assets, such as property and businesses, into our experiment with the personal benchmark, as clearly defined by JMDV. It is evident that if we only take our cash holdings into account, the 8-9% set as a long-term target will deviate significantly – either by falling short of or exceeding – the personal benchmark that we will need throughout our lives. All our assets, in every possible form, will influence the definition and development of our benchmark.

Let’s carry on with the experiment. Let’s try to balance this benchmark as if it were an accounting balance sheet with its classic formula: Assets = Liabilities + Equity, but adapting it to our financial situation. Taking into account all our assets (cash, businesses, property, etc.) and all our liabilities (debts, mortgages, etc.). But we will also add to the liabilities our cost of living – that is, the amount of money we spend (for those with small estates) and the amount we would like to spend (for those with medium or larger estates) – including the cost of repaying any mortgages we wish to take out. What our Multi-Family Office once dubbed Vital Balance, which includes our Wish List or wish list. You can find further details at: His current wealth is enough to turn his life around.

But let’s take it a step further and have another look at the personal benchmark turned into life balance. We are now going to introduce intangible assets and liabilities – that is, those that cannot be easily quantified in monetary terms or valued in the same way as a business or a house. We are referring to values that are just as important – or even more so – to our lives, such as family, time, philanthropy, starting up businesses or pursuing long-cherished activities, special trips, and so on.

All of this, tailored precisely to each individual or family, will enable us to design the restructuring required for our assets to cover our liabilities and continue to grow and progress at the desired rate. This growth must, of course, exceed a constant average rate of inflation, which, incidentally, we also estimate at 4%. However, let us clarify that we must consider three types of growth here: cash flow growth, corporate growth and property growth in the form of mortgage repayments. To balance the books, we tend to disregard growth arising from property capital gains, and this is particularly advisable in the current cycle.

As you can see, the Personal Benchmark as defined for our cash, forms part of this Vital Balance, in a way. The family’s overall financial situation and how it has developed will give us a clear idea of what we call PGR: Global Wealth Plan.

Therefore, José Mª, your very insightful comments on the Personal Benchmark could be included as one of the many components of a PGR. And I think your article is highly recommended for all investors, regardless of their investment style: fundamental, technical, value, contrarian, sui generis and, above all, for the one that is most prevalent: the chaotic one.

Although, in our view, the best course of action for any investor is to draw up and periodically adjust their PGR, I think it is extremely dangerous that the vast majority of investors do not even consider at least one personal benchmark. Those who merely focus their benchmark In the annual benchmark index, they are nothing more than small inflatable mats on which their landlubbers splash about, pretending to sail across a vast ocean. When the sea is calm, they move almost in parallel with other vessels, believing themselves to be true sea dogs. But when storms and rough seas strike, only the reliable, powerful and well-skippered vessels stand any chance of surviving until calm returns. The rest will continue to work hard right up until retirement to make up for what they lost on the high seas.

Forget the inflatable mats and start thinking about your Personal Benchmark and Global Wealth Plan. You’ll be glad you did when you’re older.

For those who haven’t read it yet, I’d recommend this enjoyable, short and entertaining little book, which makes us reflect on the sustainability of our economic system: The Time Seller, by Fernando Trias De Bes.

I also think this video, entitled Money as Debt (Translated into Spanish here (though the quality is poor), which my friend and colleague recommended to me Global Counsellor. Of all the videos and documents that recount the origins of money and its perverse the effects caused by the reckless building of financial houses of cards; I find this particularly clear in its first half.

It’s a 47-minute video, and I think that with those first 22 or 24 minutes, plus reading the book, we could spark a very interesting debate. Perhaps many of you are already familiar with it, or have seen other videos and animations on similar topics that have taken the internet by storm in recent months. Although the second half of this one veers into «conspiracy theories» that I do not share at all, I think watching it will be interesting for those who haven’t seen it yet. It is important to bear in mind that both the book and the video were conceived before the current credit crisis. To be precise, the book was written over three years ago and this video is dated February 2007.

In contrast to the video, I’ll quote just a couple of sentences from the book:

“When Rosa Regás won the Planeta Prize, I was driving my car and heard the award ceremony live on the radio. Rosa Regás said: ”Thank you for this prize. ‘With this money, I’ll be able to buy something that isn’t for sale: time.’ After hearing that sentence, I began to imagine what would happen if, in a society like the Western one, time could be bought. The result is this book.” Fernando Trias de Bes.

Xavier Sala-i-Martín, for which, as you know, I have a particular fondness, had this to say about this novel:

“It is an extraordinary example of what happens to an economy when the free operation of the mechanisms that balance markets is not ensured, an example of the disaster that looms when prices are not allowed to move freely, when people are forced to pay for things that should be free, or when unnecessary taxes are imposed on society.”

One of the first questions I’d like to raise – of the many that may arise – is this: to what extent are we purging these excesses through the current credit crisis? I’d like to compare your views and your outlook on the current and future situation. I hope that both the reading such as the video if this is of interest to you, and above all I hope we can discuss them in your comments. There is no doubt that this is the most significant issue in today’s financial world. After all, it is the markets that will depend on how this situation develops, and not the other way round.

As has rightly been said Fernan2 in a recent comment on Search, compare, and if you find something better… move elsewhere: «The truth is, to write something like that and not have anyone jump down your throat it speaks volumes about the calibre of your audience 😉«I fully agree.

In our previous article The Relocation of Wealth (I) It is reported that two fortunes are moved abroad every day from Spain or France alone, with those from France mainly going to Switzerland. The relocation of wealth should not be confused with tax evasion. Simple tax evasion causes less damage to the coffers of high-tax countries, as although such cases are far more numerous, they are partial and some are even temporary or circumstantial. However, the relocation of wealth is definitive and total. It almost always represents a move towards a better quality of life and a more favourable tax environment. It also tends to involve the transfer of large fortunes that were previously paying (as I mentioned Cachilipox) based on income, profits, assets and consumption – enormous sums of money. This relocation deals a severe blow to the country’s treasury, which until then had held that fortune. The example of the article As mentioned, this is clearly an American example and therefore difficult to apply to Spain, but we feel it is illustrative.

In light of these relocations, let’s talk about a phenomenon that is becoming increasingly evident: Tax competition between countries. Globalisation has also reached the point where supply and demand Taxation policies in different countries attract capital flows from one state to another. Perhaps we should now leave behind the notions of the unsympathetic rich, tax evaders and other commonly used labels, and begin to realise that by demonising their behaviour, we will achieve nothing as long as neighbouring countries offer more favourable tax conditions to our wealthy citizens. I’m not saying this is a better or worse scenario than the old «Either pay up, in accordance with current legislation, or go to prison«, it may well be even more unfair. But that’s the harsh reality; these days it’s more a case of a «you pay, in accordance with current legislation in Spain (with 17 regional laws in force where (choose) or pay in accordance with the legislation in force in any other country that offers you better conditions«… Something like the old «’Have a look, compare, and if you find something better relocate.»

What was previously seen as a matter of ethics and solidarity towards the poorest within the same state should increasingly be treated as a matter of the market and fiscal globalisation.

That is why the poorest countries that impose lower taxes on the fortunes of the wealthy from neighbouring countries will attract them to a greater or lesser extent (such as Malta, Ireland, Uruguay, Belize or the Eastern European countries themselves). This enriches their public coffers, enabling them to become less and less poor. This creates a certain market-driven redistribution of wealth; however, we need to shift our mindset away from nationalism to understand this and think more in terms of globalisation, including on tax matters.

Some might say that, traditionally, the most tax-friendly countries are not exactly poor – quite the opposite, in fact – but let us ask ourselves what the main source of their wealth is… How wealthy were countries such as Monaco, Luxembourg and Switzerland years before they introduced favourable tax laws?

It may not be a fairer scenario – or perhaps it is – but globalisation is leading us in that direction. Whether we like it or not. We can think of countless examples of debatable fairness that we could compare: Is it fair that fruit growers in Europe, in the absence of protectionist laws, lose market share to African or South American farmers who charge less for their produce? Is it fair to pay €3, 6 or 12,000 per square metre for a property? Is it fair to pay 10 or 100 times a company’s intrinsic value for a single share? Is it fair for a wealthy individual from country A to shift their tax liability to the treasury of country B, which charges lower tax rates? Market realities sometimes overshadow justice.

But does the market disregard justice, or does it interpret it differently? It is debatable whether it is fairer for a European to have to give up their job or business in favour of poorer workers and businesspeople in the Second and Third Worlds. It would also be questionable whether a Volkswagen worker in Navarre should lose their job in favour of an unemployed person in Slovakia or Romania, where new car factories are being built. Or whether it was fair to the German worker who became unemployed following Volkswagen’s relocation to Navarre. It basically depends on the colour of the glass through which you look at it. If we think globally, the laws of the market often redistribute the world’s wealth to some extent.

Whilst some people remain outraged and continue to hurl insults at MPs and the wealthy because of their unpunished collusion, perhaps we should accept a multinational reality in which ethics or immorality are to be found in the very laws of the free market. Laws which, paradoxically, can redistribute the world’s wealth more efficiently than politics itself. And the flow of wealth in search of lower tax rates is no exception.

Whether we like it or not, the global tax landscape is moving in that direction. Putting up barriers to the countryside has always proved very difficult. A SICAV or the waiver or abolition of gift tax, to give a few examples, are no longer malicious strategies devised by the rich for the rich. They are the natural evolution to avoid absurd barriers in the field. And globalisation has turned tax systems across the entire planet into one vast field.

«It is clear that there are many other effective ways of investing money besides gambling on price fluctuations. For example, the purchase of securities of stable financial organisations in countries with developing economies. Such financial instruments are risky instruments, but the risk is compensated by high profits. In addition, serious HYIP organisers prefer to reinsurance and invest part of the funds deposited in the securities of safe and stable companies».»

Another pearl is the unabashed warning that these programmes have a short-term end other than the collapse of the pyramid. And they constantly hammer home the point that the «real» ones are self-liquidating by returning the principal to the investors. Obviously the end is the same for all:

«The nature of high-yield investment projects has the following peculiarity: practically all of them cease to exist at a certain point. Pyramid-type programmes collapse, burying with them all the investments of the clients; and serious HYIPs terminate their activities only after repayment of the sums payable to their depositors. It is clear that all honest projects are planned with maximum accuracy and are oriented to a fairly long term of operation. But in many cases the necessity of project termination is dictated by objective economic reasons that are difficult to overcome».»

Attention to this last sentence: «But in many cases the need for project termination is dictated by objective economic causes that are difficult to overcome» i.e. pyramidal collapse, speculative total loss or directly tomaeldineroycorre.

In addition, its unique online payment method (e-money) is particularly conducive to capturing huge amounts of small payments, thus circumventing controls on significant currency movements. Of course, they also offer lucrative pyramid incentives of networking. To finish with the examples (you will find plenty of them on the net), the tagline nomirenopregunte:

«On the other hand, don't forget that most project organisers prefer to keep information about their profit sources secret, fearing dishonest competitors. That is why in many cases high-yield investment projects are absolutely intransparent. However, this in no way influences the regularity of payments and the «honesty» of the programme. The organisers of serious High Yield Investment Programmes are well aware of the effectiveness of mutually advantageous cooperation and will not risk the trust of investors.» (sic)

Spectacular! Personally, I think that the mutilated people left behind by the HYIPs deserve it for being deluded, reckless and unwary, smart alecs... I can think of so many words that I have to bite my tongue. Of course, those who cheat by offering Hyips are con artists in all capital letters, even if they were originally conned and reconverted to the cause.

However, I am convinced that Fraudulent investment propositions will always exist as long as there are investors who even minimally dissociate return and risk. Call them stamps or «intransparent» financial investments, they are nothing more than the descendants of Gregor MacGregor and its Republic from Poyais.

If documents of this kind are allowed on the net, it is because, as I have said before, the internet is like the street, like life itself. And in the street we find all. After all, a website, a blog or a simple pdf document is nothing more than a Speakers’ Corners of a global Hyde Park with genuine freedom of expression. With its drawbacks, but above all with its advantages.

Three cheers for freedom of speech! Hyip Hyip...Hurray!

«Once upon a time… at the end of the 20th century, there was a world in which armed conflicts were largely not religiously motivated, and in which economic growth rates in most countries were more than acceptable. The booming economic sectors: property, business, the stock market… Of course, there was a Third World grappling with serious poverty and health issues, but the so-called First and even Second Worlds were enjoying a period of significant global prosperity. A spectacular future lay in store for some emerging nations, which were awakening to a global market economy that was set to revolutionise the lives of billions of people. Far behind them, almost forgotten, lay the energy crisis of the 1970s and the Iron Curtain with its Checkpoint Charlie or the Cold War between blocs, with a finger constantly poised over the nuclear button. But even having left this turbulent past behind them, the inhabitants of that planet were worried and debated ways to find impossible solutions to what, from their perspective, seemed like major global problems.

Curiously, the people of that time were unaware of just how exceptional the general standard of living in their world was during those years. They remained worried and complained about the possibility that the Mir space station might fall on their heads, reduced to scrap metal because of the Russian economic crisis; they were concerned about the slight slowdown in the global economy compared with previous years.

Meanwhile, there was discussion as to whether taxation might be a more effective tool than monetary policy alone for controlling the foreseeable excesses in global consumer demand. The high volatility of financial flows from the richest countries to emerging economies was also a topic of discussion. If, moreover, these flows were driven by speculative currency trading, the volatility of the global economy could be multiplied. And that did not sit well with economic analysts at the time. Developing countries were urged to introduce measures to control the risks that voracious financial institutions were ignoring in exchange for the investment frenzy these flows generated. emerging markets.

No one ever thought that the danger might come from financial investment flows between first-world countries, let alone from the strongest currencies: US$, GBP and the Deutsche Mark.

It was a world whose biggest problem was engaging in international debate about what the main issues facing the global economy were. A macroeconomic Tower of Babel sailing full steam ahead across the globe, semi-aware of its own sweet, old familiar chaos, yet oblivious to its course. What could possibly have been worse than the economic problems of that time?»

«…And the years went by – let’s say a decade. The landscape of that world had changed completely. By comparison, the present was bleak. Islamic fundamentalism was sowing terror and war in many countries. The West (including Israel and the Vatican) was clumsily attempting to minimise its effects. In many cities, hundreds of thousands of cameras were installed to monitor the potentially dangerous individuals from carrying out attacks against the public. Boarding any commercial aeroplane was also a common practice in that world Orwellian from 1984. Energy was in short supply for those on low incomes. High demand from emerging economies, which were beginning to make a mockery of the figures produced by the exclusive G8, combined with speculation and instability, had driven the price of a barrel of crude oil to record levels. Exchange rates were fluctuating at unprecedented levels and the currency «shelter»It was a newly created currency called the €. The price of gold was breaking every record ever seen. The financial system was reeling as banks lost confidence in one another and interbank lending dried up, forcing central banks around the world to inject liquidity to prevent irreversible breakdowns in the financial machinery. Share prices of the world’s largest financial institutions were plummeting, as were the prices of debt issued by both financial and non-financial companies. The property bubble that had existed in the developed world since the start of the new century, and the credit excesses of the past decade, had damaged the financial health of the global banking sector. Volatility and nervousness – not only on the stock markets, but in everything to do with money – were palpable.

There was talk of a recession as people re-read (rather than recalled) the one endured 80 years ago. But it was difficult to extrapolate what had happened back then to a world that had been in constant flux for almost a century – the most turbulent period in history. Would the current situation cope better or worse with a recession like that one? Moreover, why was the predicted recession not even supposed to be anything like the one of 80 years ago?»

A new world order (still in disarray) had been established, and the majority of the population were not even aware of the new situation. »How could so much have changed in such a short space of time?’”

SHOW YOUR BOARDING PASS!… SHOW YOUR BOARDING PASS!…

My reading was abruptly interrupted. I thought that, given what happened to them in the following decade, the problems faced by that civilisation at the end of the 20th century were nothing but a load of rubbish (apologies to anyone who might take offence). Well, after this first chapter, I thought that perhaps this second-rate sci-fi novel I’d bought for 9.99 $ at the airport duty-free kiosk might entertain me enough. I had to kill time whilst waiting at the gates of the boarding bridges in whichever terminal I was in over the next three days.

Back to reality: I now had to put the booklet away in my briefcase because I was approaching the security checkpoint. I looked over the heads of the crowd and took in the scene to which, surprisingly, we all seemed to have grown accustomed: several rows of barefoot people holding up their trousers, which had no belts. In silence. Resigned. Surrounded by barbed wire converted into modern stainless-steel barriers. Uniformed officers and dogs, both surly and trained, bellowing orders. Thorough searches. Confiscation of toiletries. X-rays. With all our belongings on a plastic tray that we would have to return and stack neatly after the security check, in the baggage reclaim area.

I don’t know why images of Auschwitz or Birkenau which we’ve all seen at some point… I’m letting my imagination run wild – perhaps I should stop reading cheap sci-fi pulp fiction and focus more on the real world.

Crystal balls do not exist. And anyone who claims otherwise is either mistaken, lying or a fraud – or all three. Readers should therefore take the strategic guidelines we are about to discuss with a pinch of salt. Nevertheless, we are going to stick our necks out, as this is a strategy that we believe to be reasonable for certain middle- and high-net-worth individuals.

Let’s start by saying that we are going to propose a long-term strategy, so we must approach these investments with a time horizon of at least five years. We believe that this new year, 2008, is and will be a good year to invest in US assets. This pack The investor has 4 Aces or areas in which to make strategic investments interdependent: Property, Fixed Income, Equities and Foreign Exchange. Perhaps the latter is the most uncertain, but given the fall in short- and medium-term interest rates and the current exchange rate of 1.5 $ to the euro, many investors feel comfortable investing in the US dollar.

Let’s take it one step at a time, as he said Jack the Ripper:

1. Properties located in areas that are attractive to European investors, such as Florida, California or Manhattan itself, have experienced – and are likely to continue to experience – a slowdown in property prices across the board. Houses or flats prime should be at the top of investors’ lists. And although their price has not fallen as much as that of other assets, real opportunities are beginning to emerge that keep their potential for an upward rally intact prime once the sector recovers. Undoubtedly, these are enviable upside prospects from the perspective of those who have suffered in the Spanish property market.
2. Corporate fixed-income markets have suffered and will continue to suffer to an unprecedented extent. The stability of corporate debt with investment grade Since last spring, it has become a veritable cascade of gold knives. A decline that is likely to continue until at least the end of the 2008 financial year. But there are already some very tempting gems to be found with which to start building a portfolio, both in the non-financial sector and, for the more daring, in corporate debt from the very heart of the investment banks rocked by the credit crisis.
3. US equities as a whole have fallen by more than 12% (DJIA) over the last three months. Here we will find large, exemplary companies at prices that are already very attractive. Furthermore, there are sectors such as technology where the decline in the top companies has exceeded 25%. And for those who love a thrill, the financial sector has been, and continues to be, the hardest-hit sector. Its declines to date have been well over 30 and even 40%, and amongst them we see world-class banks such as Citigroup, Bank of America, Merrill Lynch o Wachovia, to give just one example. In any case, for investors with a lower tolerance for risk, it is not a bad idea to steer clear of that financial sector. For further information on the best US equities, please consult the Teacher. If this were a Spanish RV, I would also refer you to the other one Teacher, opposites in every respect, yet both Masters.
4. As for the currency, its greatest appeal lies in the cost-saving benefits it offers for our strategic investment across the three scenarios outlined above. Not to mention that the cabin depressurisation It is forcing the Fed to cut $ rates to levels where mortgage holders can breathe on their own and remove the oxygen masks that have suddenly dropped from their ceilings. Perhaps currency speculation might also yield a capital gain on our investments via the $/€ exchange rate, but the US dollar may also have bottomed out and stagnated, or its undervaluation against the € may even become more pronounced. Let us not forget that this is the mother of all speculation. In any case, investing in a coordinated manner across the three scenarios outlined above, with the euro trading at one and a half dollars, fits perfectly into the overall picture of this strategic investment.

But how can we make an investment like this in a structured, interconnected and coordinated way? The answer is that we are working on it as a multi-family fund office. Firstly, we analyse the strategic opportunity presented by the global economic landscape. We then assess our clients’ interest and willingness to make a structured or tailored investment across all the scenarios mentioned. Once the 4 aces In those areas where we believe it is worthwhile to invest, we focus on selecting and specifying the assets. We then develop a generic framework that suits the majority of our clients, although each structured investment must nevertheless be tailored specifically to each client. Naturally, to achieve this, we have drawn on the help and advice of the leading specialists with whom we regularly collaborate, as well as new partners such as reputable professionals from Royal We will be present in each of the selected markets. And finally, we will seek the appropriate international banking framework to coordinate the management, custody and administration of the assets. At present, we are considering bespoke structures starting from around €700,000. Subsequently, in line with our commitment to adapting high-net-worth investment protocols for smaller investors, we will aim to adapt these structures to amounts below €300,000.

All of this is structured as a Structured Investment scheme that allows investors to invest simply on the basis of the value of the property to be purchased. And to ensure not only that, within a maximum of 15 years, the investor has fully amortised the property, but also that their initial investment has benefited from the dividends generated by the equity portfolio and any potential rental income from the property (if they do not wish to use it exclusively for their own purposes).

Let us not lose sight of the fact that the main motivation for making an investment of this kind is the potential capital gain from each and every one of the four aces. Of course, as these capital gains are realised, the break-even From that point onwards, the period over which we will regard the investment as doubled will be significantly shortened, enabling us to recoup the cost of our property purchase in well under 10 years. In our view, this four-pronged strategy could, in the coming years, deliver truly spectacular returns on our investment, which for the client would not even represent a simple opportunity cost.

Personally, I’d prefer a small flat in Manhattan to a little house in Tampa Bay or Malibu. But this will have to be tailored to each client because, however profitable an investment may be, it’s pointless if it doesn’t make the owner happy. Is the American Dream making a comeback?

We’ll keep you updated…

The cheese They took it away a long time ago. Today’s turbulent world is constantly shaking things up, and we’ve got used to being proactive, to creating our own good luck, in short, to improve the way we fight for a life that nobody usually hands to us on a plate beyond our conception, gestation and childhood. The preparation that for some would still be an unattainable ‘upgrade’ or the coveted benchmark has, in our times, become a vital minimum requirement for defending ourselves in this jungle of consumerism, taxes, competitiveness and an endless array of stimuli that are extremely dangerous to the integrity and growth of our wealth. No one now enjoys permanent, secure and easily accessible wealth. For most, wealth is as elusive and volatile as ever. And everyone—at least those who wish to rise above mediocrity—must compete in a world where we find people on a thousand-euro-a-month wage with a level of education that would be the envy of any well-off person from a few decades ago. This is a reality that only those lulled into complacency by a cloak of inherited and/or dwindling wealth, or the incompetent, can ignore.

Fortunately, more and more people are turning to independent counselling, which is, of course, a far cry from the role of an adviser or manager at a financial institution. Those with substantial wealth seek guidance (rather than management) from multi-family offices ad hoc, that’s our core business. But when we consider our work and passion beyond corporate growth, when we focus more on the journey than on the destination, we realise that the work we do for large fortunes can be adapted to most medium-sized portfolios. The only difference is that the applicable cost must be much lower, and therefore it ceases to be profitable for most multi-family offices. Is that reason enough to turn away small and medium-sized investors? Only if we focus exclusively on the profitability of our business. But what’s more, through some small-scale philanthropic or low-cost advisory work, we have received an enquiry from a larger client who does meet our financial expectations. That is one of the great things about enjoying the journey: it takes us straight to the destination without us even realising it.

But recently – in the last few years or even months – some people are realising that things are taking a turn for the worse for many. It is no longer just the cheese that is moving; our compasses are shifting too. It seems we are entering an era where not only will all the virtues of proactivity and constant self-improvement be necessary, but we are also being forced to find our bearings in a global political and economic landscape for which the navigational methods that previously helped us find our way are no longer adequate. Could we say that it is harder to make economic progress today than it was a few years ago? As a Family Office, continuing with the proactivity and the creation of good fortune that we have already made part of our routine, we prefer to think that opportunities are opening up today that we have never encountered before. We are perhaps facing a black swan which we should appreciate in all its splendour and uniqueness, rather than lamenting our misfortune.

Before setting off in search of new cheeses, we must nowadays set off in search of new compasses. And when we find them, they will lead us – though not without effort – to new, unknown and delicious cheeses lost in a exciting a new maze. Essentially, this change of scene is nothing more than yet another shift in the location of traditional cheese. In other words, just as we had grown accustomed to discovering new cheeses through effort and adapting to change, another change has come about. But this time, it is not the location of the cheese that has changed, but rather the our own search interface. Our current ones will no longer be of any use to us old trainers not only our passion for sport and our enthusiasm for setting out in search of new cheeses, but we must go further still to keep making progress. Is it harder now than it used to be? Only time will tell whether we have found it more or less difficult. I’d say it’s certainly more exciting, so what we must do is enjoy this journey we’ve been given the chance to experience more than ever before.

Through philanthropic counselling, we have observed how, amongst smaller investors, the search for a compass and for ‘cheese’ has become particularly arduous in this day and age. Those with modest wealth – ordinary savers – do not have access to investments structured and designed for small amounts. From our position, we try to tailor these investments to this client profile, but we do not always succeed. Some interesting investment opportunities elude the small investor who has only 25 or 50 thousand euros at their disposal. On the other hand, no one has a crystal ball to guarantee the absence of errors in the event of a crisis in the economic system, not even the Family Office/high-net-worth client partnership. But there is no doubt that sound advice helps to minimise risks and find the path to the compass that will enable us not only to find our way back through the cheese maze, but also to plan our wealth for the long term in the best possible way: without neglecting the enjoyment of the journey, whilst at the same time growing our wealth.

Who’s taken my compass? It’ll surely be easier to find it if someone shows us the way, and once we’ve done that, the search for new cheese will feel like a familiar old path.

Bloomberg TV, Wednesday 23 January 2008, Gonzalo Rengifo, Managing Director of Pictet & Cie. in Spain, Portugal and Latin America:

«At the moment, investors in the stock market should be cautious, but that does not mean they should stop being active, as there are numerous very attractive investment opportunities they should take advantage of.».

A. Redondo and J. Zuloaga, Expansion Sunday 27 January 2008, A guide to weathering the stock market storm:

«After several years of enjoying a Mediterranean climate, global stock markets are currently facing a veritable storm. The clearest example of this shift is reflected in the last trading week, when the subprime crisis and fears of a US recession triggered the biggest rises and falls in the Ibex’s history within just three days. Many investors have been shipwrecked by the new storms on the trading floor. Probably because they were unaware of the lifeline offered by derivative products.» (…) «But, as well as sheltering from the storm, investors can also capitalise on it. To this end, one option is to opt for trading in futures.» (…) «In addition to these products, financial institutions are turning to new tools such as contracts for difference (CFDs), which have been hugely successful in the UK, or certificates, which have proved a hit in markets such as Germany and Italy.» (…) «Meanwhile, certificates also broaden the range of possibilities, although their tax treatment makes them difficult to market. However, some institutions, such as UBS, Deutsche Bank and, to a lesser extent, Société Générale, have decided to take their first steps into a product that is listed on the stock exchange and is structured around one or more indices, a basket of shares or a sector, allowing investors to bet on falling prices, with the aim of multiplying gains or reducing losses. They are ideal for non-directional markets, says Miguel Muñoz of X-Markets, Deutsche Bank’s certificates division.»

Bitchbag, Saturday 26 January 2008, comment on our article Coitus interruptus:

«We’ll see how this all turns out, because at the moment both sides are being torn apart – the bulls and the bears at the same time. The only ones coming out unscathed for now are those watching the bullfight from the sidelines.»

Cretan, Wednesday 23 January 2008, in his article Trichet is standing firm, and the market is paying the price:

«The market remains so turbulent that the best thing to do is to stay on the sidelines and hope that negative news doesn’t keep piling up. I won’t tire (for the time being) of continuing to recommend the same thing: a great deal of caution, and the further away from the markets, the better.»

JMDV, Thursday 24 January 2008, in his article Jauja again:

«What I’m trying to do is call for caution and remind you that all the doubts that existed on Monday (for those who actually believed them) still hold true today, Thursday. Nothing has changed except Mr Market’s mood. Let us therefore take this opportunity to fill our portfolios with good companies at good prices…» (…) «Remember that the aim of any investor (whether technical, fundamental, long-term or short-term) is to grow their wealth over the years. If we fill our portfolios with high-risk shares, blinded by buying frenzy, we run the risk of never achieving our goals.»

In this very post by JMDV, we find comments – a gem like this one from The Omega Man (one of my favourite commenters; sorry, but I don’t know where to link to you):

«Pasta and fundamentalisms:’
Value investors (myself included, at least) aren’t value investors for aesthetic, philosophical or religious reasons. We are value investors because we want to make as much money as possible, and we have at least 5–10 years to reap the rewards. And if you spend enough time reading about the When looking at this topic – which investors have achieved the highest annual returns, and so on – you quickly realise that the most effective way to do so is through value investing. The fact is, if you’re not in a hurry, making money on the stock market is incredibly simple: 1. Calculate the intrinsic value, as conservatively as possible, of a number of companies (and JM explains this to us every now and then) (how to do it). 2. Buy, when they come within reach, at prices well below that intrinsic value (50-40%). 3. Sell when the share price approaches its intrinsic value. And that’s that. There’s nothing else to do. Are prices falling? Well, buy more if you’ve got the money, and if not, just be patient and stay calm. Can’t find any? Companies to buy? Well, just keep your cash reserves up and carry on looking. Anything other than those three points above is just noise, and the mind playing tricks on us by looking for patterns in »the turmoil on the stock market."

We could give many other examples, but we think these will be enough to give you food for thought:

In the first instalment, we have comments from Gonzalo Rengifo (Managing Director, Pictet Spain, Portugal and Latin America), and the article in *Expansión* features contributions from Miguel Muñoz (Deutsche Bank’s certificates division), Miriam Pérez-Camino (Head of Listed Products at BNP) and Francisco López (derivatives expert at Gaesco Bolsa), amongst others. They are nothing more than Financos are on the hunt for Inversópatas. (We warned about this back in June 2007, but they’re still as ravenous as ever)

In addition, we have included Putabolsa, Kretan, JMDV and The Omega Man in a second group. I think we would all agree that this selection has a great deal of quality (I should point out that, technically speaking, I consider these bloggers to be at least as knowledgeable as the leading ones) whilst diversity. It is clear that within this second group we might find radically different views on investing in the markets; however, given the current situation, their views converge on many points, diverging significantly from the talking points put forward in commentaries by Bloomberg and Expansión.

What differences are there between these first two examples and the rest of the bloggers and authors whom we find much more relatable and admirable? Independence. Indeed, none of our dear colleagues and neighbours has any ulterior motive beyond offering honest advice out of a purely educational or philanthropic desire. Whereas all those quoted in Bloomberg and Expansión spout a line on which the revenues of the companies paying their salaries depend, and which will potentially enable them, over time, to climb the corporate ladder. That is all there is to it. It is not a question of some being clever and others foolish (there may be a few, but I doubt they are in the latter group), nor is it that their view of the markets and risk is incomplete or distorted. I repeat, the essential difference is Independence.

If we extend this phenomenon to other areas of wealth management – and not just to the markets – we will gain a better understanding of what counselling entails. If we also apply the quintessence of the networking With counselling, we will be very close to what a multi-family office is. The The cost of this independence will be more than offset by the savings on fees and the avoidance of unnecessary risks, not to mention the potential losses from unsuccessful investments.

My respect and admiration for the second group mentioned, and my deepest contempt for the first. For at times such as these, I hold them particularly responsible for the catastrophic damage caused – and likely to be caused – to the assets of investors who are unaware of the grave dangers posed by the «lifelines» offered to them by their derivative products. Proposing investments to clients who lack the necessary knowledge to understand or accept the risks involved is not only unethical. Even though their clients’ operating accounts meet the targets set, and unfortunately their superiors reward them for this, even in times of prosperity, it is negligible.

How much longer will the average investor continue to place blind trust in expert analysts on the payroll of companies selling financial products? It’s not that difficult to work out Who’s Who in the City if we look at the economic independence of their slogans.

It is still unclear whether what was supposed to be a complete overhaul of the market, a clean slate, a fresh start or, as the experts A «healthy, strong and widespread correction of the excesses of recent months» may be cut short. Perhaps we are looking at staggered declines, and over the coming weeks we will see a somewhat atypical and erratic sell-off – but a sell-off nonetheless.

But it is also possible that we will see a period of extreme volatility with a very limited downward correction. We might even see a false ‘clean-up’ scenario, built on shaky foundations, that underpins a new and spectacular bull run in global markets in the short to medium term. In either of these latter two cases, the foundations for a new bubble-like structure with highly dubious foundations could be recklessly laid.

It’s not that we’re hoping for a sudden, devastating crash that would mercilessly punish investors, but if the sell-off doesn’t go any further than we’ve seen so far, we’ll be left with a strange feeling. Something like a coitus interruptus. As the JMDV, Master of Risk, If confidence does not return after the slowdown, when the economic expansion is due to begin, but instead returns earlier, halfway through, a bad situation.

The macroeconomic fundamentals being discussed in Davos are beginning to move away from euphemisms and call a spade a spade. And this stands in even sharper contrast to the spectacular market rallies (particularly in Europe) that we are seeing this week. But in a climate of confusion such as the current one, we believe that the slump that began on last Monday’s ‘Black Monday’ was a way of fitting together many pieces of the economic jigsaw puzzle we have been grappling with for many months. To the new world order which we do not yet understand, and which is why We find it chaotic, it would be in his best interests to start from a stock market scenario lacking momentum, such as the TriNa. An aerophagic world, with oil at 100 $ and fundamentalist nuclear terrorism, amongst many other recent evils, has very little tolerance for bubbles.

That is why what might at first glance be seen as a positive – that is, preventing a further fall in the markets and minimising what began as the storm perfect, leaves us with a strange sense of unease. Although it might seem typical of a character from a novel by Sacher-Masoch, this sudden halt to the falls leaves us with the unpleasant feeling that coitus interruptus. I know that those affected by the recent stock market falls – that is to say, almost everyone in the West – may not understand these arguments and may even take offence. But this is by no means a mockery of other people’s misfortune; I myself am suffering the effects of the falls in Chinese or US equities, for example. Furthermore, almost all our clients have been negatively affected to a greater or lesser extent. That is not the point. The point is that the depth of this misnamed ‘crash’ does not seem sufficient, and the timing Nor are the repercussions of this allowing for prudent restructuring.

As always, time will tell. Perhaps we will eventually see the falls deepen, or perhaps we are looking at a platform from which new rallies will take hold, which time will prove to be solid. But our feeling, I wouldn’t even call it an opinion; it’s just that we should suffer more in order to sufficiently atone for the lustful excesses of our recent past.

«Those who love you best will make you cry.» I would never have thought that could apply to the stock market.

Come and see: Here you will find a world of thrills and spills. With wild beasts that will make you shudder with their roars and claws, illusionists that will leave you speechless with magical tricks, tightrope walkers and contortionists with inhuman postures, window dressers who will free themselves from impossible traps and, of course, clowns who will make us laugh out loud.

Only a few sessions. Cannot be extended.

After enjoying the show (some children are terrified of it), let's talk about the economy. On the reflections that are taking place and the conclusions that analysts will reach in the next few days in the Forum for Davos.

This year's forum is more timely than ever and aims to «improving the state of the world«. The Swiss professor Klaus Schwab was the forerunner of these meetings, which originally discussed business strategies, and has become the true World Economic Forum.

Some very interesting ideas have been contrasted among its attendees, here are some examples:

The mission of the EDFIntervention and rate policy decisions are not intended to save the markets from an economic downturn. Crack, but to save the economy. Many people often confuse one thing with the other. It is like not distinguishing sex from love, although they are related, we all know that it is very dangerous to confuse them.

Another very interesting reflection that is being discussed at Davos is the real recession (rather than technical) that the economy in general seems to already be in. The big unknown is how deep it is and how many countries will be affected. Once the intensity and scope of the crisis has been determined, it will be time to worry about how long it will last, but that will come later.

The EDF, The Federal Reserve, as we have seen, is taking the emergency measures that the instruction manual of the economy requires: significant rate cuts, while at the same time helping the hardest hit sectors with economic and fiscal measures, in addition to those that we will see in the near future. The Federal Reserve has rolled up its sleeves and is bailing water while activating the emergency protocol.

Europe's neighbouring ship is watching from a distance. Far from checking the safety of its own ship and fearing the waves that would be caused by the sinking of the American liner, it continues to proclaim that it will not tolerate inflation and threatens rate hikes. It is not only Trichet but also the rest of the European leaders, deny the recession. As if denial itself were enough to bail out the water. They deny the real estate affectation having in their cellars bubbles like the Spanish and the Irish. The ECB will soon have to resort to the emergency instruction manual. recessive, But it seems clear that he will do so late and badly. It does not yet seem ready to roll up your sleeves as the EDF, But water is not reduced by talking, it is reduced by acting.

Davos is so timely that perhaps it will open your eyes European authorities to stop thinking about the stock market circus and focus on the real problems of the global economy. If they don't, the circus will leave the big top and take to the streets of the city. And the contortionists, tightrope walkers, illusionists, wild beasts and clowns will cease to be a spectacle and become a nightmare. surreal.

Come and see, but we will always have the following Davos.