Cluster Family Office Blog

Chance has led me to a post from solobolsa.org in which he offers a simple reflection on what to do if we win the lottery. Before getting into the details, let me fill in the figures on the percentages of lucky winners who have lost or spent it all within 5 and 10 years: 35% in less than 5 years; but the percentage of those who have gone bankrupt soars to almost 90% after 10 years. Terrifying, isn’t it? However, these figures should be adjusted slightly downwards to account for the minority of cases where people may have evaded the tax authorities and moved to opaque paradises prosecutors, joining the long list of those who have fallen on hard times.

Apart from a few exceptions, I suppose the first thing you’ve all thought on reading this statistic is that «that wouldn’t happen to me», because we believe we’re capable of making far fewer mistakes than others. Perhaps that’s true in some cases, but the fact is that those who make the most reckless mistakes, commit the most rookie blunders, and are the most naive and least prepared, end up ruined much sooner. These are the views of the article’s author, and I fear they are shared by many who will probably never read our blog:

– Share a 10% with family and close friends.
– Donate another 10% to charity.
– Pay off my house; that would clear my mortgage.
– Change the car; it’s about time.
– 25%. I would buy some shares – at least five of them, across different sectors – with a high dividend, which would allow me to earn a little more (if possible, quite a bit more) each month than I do in my current job.
– 5% for investments in plots of land, flats or property funds.
– I would invest the remainder in global actively managed equity funds and at least 5% in fixed-income investments, with a focus on short-term instruments.

If you take a closer look at the author’s plans, you’ll realise that, in his case, he might have some money left after 10 years, but it will basically depend on the stock market and whether he has the nerves of steel to hold on when it falls, or whether he’ll be tempted to invest in a business or enjoy life a bit more. But under no circumstances do his plans guarantee his future.

The first major mistake: spending small amounts straight away on family, friends and charity. The second major mistake is paying off any outstanding mortgage(s). The third is buying a car straight away. As for the rest, apart from a 5% in property investment and another 5 % in short-term fixed-income investments, it is to be invested exclusively in the stock market.

But the crux of these mistakes lies not so much in how the money is spent, but in the way the wealth is structured. Let’s take it step by step:

When a lottery winner or heir receives a large sum of money that is set to radically change their life – for better or for worse – the first thing they should do is seek out an independent counsellor or adviser with experience in dealing with such cases. Clearly, it is not possible to find such professionals amongst private banks, law firms or asset managers, or money managers from investment firms. If your wealth is not sufficient to engage the services of a multi-family office, and assuming you cannot find an independent adviser capable of guiding you towards safeguarding and growing your wealth in the medium to long term, we shall attempt to provide some general guidelines that may help to clarify certain concepts for those who find themselves in a similar situation, whether through winning a lottery or as heirs.

Firstly, you need to start by investing your money in liquid fixed-income assets from day one. That way, you’ll have days, weeks or months to find a good financial adviser and make decisions – lots of decisions. Draw up a wish list which allows us to plan how we want to live from that point onwards. We need to work out the income required to maintain our desired standard of living and factor in the long-term mortgage repayments for the properties we wish to buy in the near future. Once this monthly or annual figure has been calculated, we must add in contingencies, health insurance, financial support for others, medium-term care needs for family members, overall wealth growth at CPI x 2, and a long list of other items that we almost always forget when we draw up a wish list without proper advice. Of course, this list will vary considerably from one case to another, as we cannot apply the coffee for everyone when it comes to shaping our future way of life.

From this point onwards, we must restructure our assets to check whether they generate sufficient income to support our lifestyle, including, of course, any mortgages arising from the purchase of the properties we wish to acquire. If this is not the case, we will need to review our wish list downwards. Obviously, sound tax advice will enable us to structure our Global Wealth Plan in such a way as to minimise the tax liability.

There is a huge difference between receiving a prize or inheritance and starting to spend small (or large) amounts whilst investing the remainder in equities; or using the fixed-income returns generated by all those assets to spend, help others, plan for the future or buy property with mortgages. Naturally, we must be able to invest our money in such a way as to achieve returns that exceed mortgage costs whilst minimising risk. And we will achieve this through sound advice, effective tax planning and a minimum investment threshold that allows us to access certain financial products and, of course, to pay for the services of this comprehensive expert advice.

Returning to the example of our friend from SoloBolsa.org, you’ll see that you could do practically the same thing: give money to family and friends, make donations, buy a new car, etc. You could even invest part of your earnings in the stock market. But we should neither pay off mortgages nor leave the future growth of our assets in the hands of the stock market, as that growth must be safeguarded and secured.

These protocols, which are designed for sudden windfalls (such as lottery winnings or inheritances), are essentially also applicable to any type of medium- to high-value wealth, even if it is newly acquired wealth resulting from the sale of property, shares or business profits.

Even in the case of fortunes that are just beginning to take shape, without lotteries or inheritances, as we mentioned in our article Cluster effect back in April:

«Although many may not believe it, doing the right thing and working with diligence and wisdom attracts good fortune. Perhaps the good luck »it is not as random as the fools would have us believe, and I would go so far as to say that, in economic terms, it is not even that unfair.’

I’ve just happened to come across this article we wrote on 19 May whilst re-reading it. Given the current circumstances and outlook for our entire economic system, I find this case shocking to say the least – yet it is as real as life itself. I think it’s worth reading it again and realising that, in the midst of the financial jungle in which we live, there are people who are oblivious to almost everything, whose role is simply to serve as cannon fodder to cover up the system’s shortcomings. It makes me think – what about you?

«One more olive tree.».

However, I love this game!

Predictions are always easy to make but very difficult to get right. As I’ve already mentioned repeated It is often said that currency speculation is the mother of all speculation. But in the same vein, I would also go so far as to say that speculating on the direction of interest rates is one of the most predictable bets or speculations we can make across the entire economic landscape.

However, the current situation that has arisen since this summer as a result of the global credit crisis has created a great deal of uncertainty in this area. The rally The rise in interest rates for both $ and the euro has been cut short unexpectedly due to the serious destabilisation of the US mortgage market. Fears that the global securitised credit bubble might burst have forced a radical change of course in the upward trend in interest rates for the world’s two benchmark currencies.

The Research Department of the BBVA warns according to a report in *Expansión* that in just one year’s time we’ll be able to see the Euribor at 3.9%, compared with the current 4.725.

If, as we said at the start, currency speculation is the mother of all speculation, interest rate speculation could be the youngest of her daughters. So how might we derive some benefit from this higher level of predictability? A logical option would be to position ourselves in medium- or long-term fixed income, moving away from the contrarian strategy that has been recommended during the recent period of rising interest rates we have experienced. We are not suggesting that one should abandon the RV in support of the RF but rather that we consider a change in the investment horizon strategy for the latter.

It seems reasonable to assume that, if the negative effects of the credit crisis are set to persist over time due to the involvement of securitised mortgages in the medium and long term, we can also expect a scenario in which interest rates flat moderately bearish or even slightly bearish in the short term. The ghost inflation, which is so feared by all official bodies in times of economic prosperity, becomes a the lesser of two evils during times of major crisis, such as the current credit and liquidity crisis affecting the system. In other words, the ghost It’s not so scary next to a Alien, and a rise in inflation is better than a collapse of the system. However, we have already made our view clear regarding the possibility that this crisis might bring down the system, despite the irresponsible panic. You can now look back (not all texts stand up to this test) at the articles we wrote at the height of the crisis back in August: A historic opportunity or a global economic collapse (I), also the second part and (II), or No news, bad news...good opportunities.

A slowdown in interest rate rises boosts hopes of overcoming the crisis and makes investing in RF, lending our money preferably to solvent companies outside the financial sector, although we can also take on greater risk and find real bargains within the sector, as was suggested at the time Buffett. But there’s no doubt that the crisis of confidence is leaving us with some real gems, whose returns shine even brighter now that interest rates have come to a halt.

Investors who cannot conceive of diversifying their portfolio without allocating an overwhelming proportion of their assets to property suffered a severe psychological blow when they were forced to accept the evidence that the Spanish property market had peaked. Although for some it proved more difficult than they would have liked to become aware Although it was initially thought that the bull market had collapsed, it now seems to be generally accepted that new property investments should be made in other countries with greater potential rally singer.

Some people already emigrated a few years ago to countries such as, for example Bulgaria, Romania or Morocco, in search of the big wins they were after accustomed. Others have done so recently and at the wrong time, since – just like on the stock market – it’s others who have to earn the last euro. However, the shrewdest among them have gone one better intra-Community in Malta, with excellent results. In short: speculators, those with deep pockets and even small investors on the lookout for bullish property cycles, which coincide over time with the emergence of countries with fledgling economies as they join the all-powerful EU (or also known as Pokerian linnet).

As he explains so well Echevarri, the monetisation via ‘Rentals in Spain’ is endemically careless. And this pushes us even further into the abyss of property investment in countries in the process of who knows what.

But against this backdrop demotivating For those who cannot imagine building their wealth without bricks and mortar, an old-yet-new world and a dazzling paradise has opened up. Why not stop looking eastwards and start looking towards the west?
There’s a bit of everything there: developed countries, developing countries and even countries that are on the way to who knows what. And all of this under a wonderful common theme called US $. Indeed, with one euro to one and a half dollars Any investment across almost the entire American continent is a real bargain. You simply need to choose according to your investment preferences: Property primes in full Manhattan, resorts in true Marina d’ style’Or in Florida, the Mexico more touristy, Central America, the Caribbean, Brazil, Punta del Este (Uruguay), Argentina, etc., etc., etc. The only thing left would be for the Castro family to join the Euro party and for Havana to soon become a mini-Shanghai just 90 miles from Miami.

All in all, a veritable real estate investment frenzy at one and a half dollars to the euro. Will there be anyone who still prefers to speak broken Hungarian or Romanian rather than conquer the The Americas with a perfect Espanglish?

It reminds me of that black-and-white film called Welcomeo Mr. Marshall with that endearing little song: «You we were welcomed Americans with so happyyy«. But on reflection, European investment in the Americas is purely speculative and lacks the spirit of reconstruction that characterised the Plan Marshall, although he could certainly do with one from Chihuahua downwards.

Anyway, it’ll always help to calm the jumpsuit Spanish and European investors’ property portfolios. With the euro trading at one and a half dollars, the term ‘New World’ is taking on new meaning once again. Let’s hope it doesn’t end up like the Wild West. Nor that, in a few years’ time, Europe will once again need a Marshall Plan to repair the damage caused by the excesses of the euro. For the time being, as they would say, fundamentalists Estate agents: God bless America, we trust in «bricks and mortar».

Which is more important, winning a match or a championship? A GP Formula 1 or becoming world champion? Winning a battle or the war? We see time and time again that sportspeople who retain the result Strategically speaking, sometimes simply picking up points is vital to becoming champion. Pace yourself, looking after the car’s mechanics or tyres, taking your foot off the accelerator at critical moments when others take greater risks out of necessity or recklessness. All of this forms part of the strategies needed to succeed.

However, when it comes to our assets, our strategic vision becomes blurred and oversimplified to a very dangerous extent. Most people are only concerned with the short-term return they will get on their cash. And they lose sight of the ultimate goal, which should be the sustained growth of everyone its assets over the decades. As we have already mentioned in The investor Resilient for the month of July:

«We’re all capable of making good investments; we simply need to seek advice from someone who can help us avoid making a lot of bad ones.»

But the most important thing is to realise that the long-term performance of our assets will be the sum of these two, the investments the good and the bad. And also the future growth we are able to deliver for the rest of our assets, which do not are investments in the strict sense of the word. Despite this, most people focus on achieving the highest possible rate of return on their cash, keeping track of their returns on a monthly, half-yearly or annual basis, but few look beyond that. Property translates into rental income and passive capital gains which, rather unremarkably, will accrue of their own accord over the years (however, as we have explained in a previous post, we dare to challenge some of the principles of Kiyosaki). But what is undoubtedly the biggest mistake is that obfuscation due to immediacy on the return on our cash, which requires no rigour whatsoever.

We often talk about investors, when in fact we should be talking about managers. Although most people are only concerned about one investment Given its short-term benefits, the right thing to do would be manage and/or to manage oneself our own assets for their long-term growth. That’s the best way to make money over the course of our lives. On the other hand, focusing solely on the desire to achieve a 10, 20 or 30% return on the stock market every 31 December may have negative consequences for the rest of our long-term wealth.

The de-taxation The gradual diversification of our assets as they grow is a winning strategy in the medium and long term, as when a portfolio is still in its early stages it is much easier toto eat the legal framework to ensure that its growth takes place in an environment of low taxation. On the other hand, when one’s wealth is already considerable, the de-taxation what can be obtained legally is much more limited, although by no means negligible if it is done imaginatively and expertly.

The Strategy, we must devise the overarching strategy ourselves, if possible with the help of a director or Counsellor, but always adapting it to our family’s current and, above all, future needs. The other key factor is the Rigor. Deviations from our strategic wealth plan due to a lack of rigour are the most common causes of poor growth (or decline) in our wealth over the years. Of course, all of this must be updated regularly in line with changes in our lives: career, family, geographical, etc.

The Championships are among the representatives (or self-advocates), whilst races or matches are rife with investors who are solely focused on the glory of immediate, one-off results, thereby putting those whose sole aim is to become champions and go down in the history of that sport at serious risk of injury or accident.

Whilst re-reading some of our articles from a few months ago, I came across one that I’d like to revisit—or for those of you who’ve only recently started following us to read for the first time. It’s about the A Guide to Financial Independence for the Average Household.

That said, whether you’ve read this before or not, I’d like to emphasise the potential our heritage holds if we harness it properly and make the most of everything it has to offer. Cash, business opportunities, but above all the properties can and should generate income which go far beyond simple rentals which they can only hope to secure at best. All our properties can be an asset, even the properties we reserve for our own enjoyment.

Let’s remember that Robert Kiyosaki In his numerous books, he proclaims to his readers that «your home is not an asset», referring to the long-standing custom of treating properties used for one’s own use and enjoyment as just another item on the assets side of the balance sheet, which in reality only «take money out of your pocket». But if we can find alternative financial arrangements capable of generating fixed and secure income that exceeds mortgage costs, we can turn this scenario on its head:

The property cycle has now run its course. And it will remain so for the next few years. But for those who feel uncomfortable unless the bulk of their assets consists of property, even during downturns, there are some very attractive financial solutions. Apart from any rental income they may generate, utilising the mortgage value of their property will allow them to continue to benefit from the potential return on that capital and future capital gains on the properties, even for those intended for their own use.

Let’s take an example: We suggest to a new Family Office client that they divest themselves of property in favour of cash, so they can invest in fixed-income securities that will generate a regular income, which will be applied appropriately and rigorously to their PGR. But he argues that some properties have sentimental value that he wishes to preserve, or he is confident that property is a safe investment even in a cycle such as the one we have now entered. Or perhaps he does not feel comfortable without owning a certain number of flats, plots of land, etc., which he believes will not be affected by the crisis in the sector. They also argue that if the bear market suddenly turns into a bull market, not being positioned would entail a very significant opportunity cost. Well, the solution we would propose is the initial conversion of properties intended to generate rental income – those to which you have no particular attachment and which are likely to sell for cash. You could also use a mortgage to finance properties with sentimental value or those intended for your own enjoyment, and invest the proceeds in high-security fixed-income investments at a higher interest rate than the mortgage rate. All of this would be implemented financially to generate fixed income in the most advantageous way, and immediately afterwards, this income would enable the acquisition, via mortgage or leverage, of new properties that are better selected and suited to the PGR. The opportunity cost would be eliminated as potential capital gains would remain intact, the selection of properties would be better suited to the family’s present and future needs, and furthermore, the fixed income generated would, of course, comfortably exceed the mortgage costs of all transactions. This margin would even allow for other applications within the PGR that we would design in conjunction with the client. Each case would be carefully assessed to make such rental income tax-free to the greatest extent possible, whilst the mortgages on the client’s primary residence would provide tax relief. We have just created a Cluster effect using the client’s assets to achieve the current PGR whilst ensuring spectacular future wealth growth.

Tax exemption, leveraged fixed income, rigour, maximising returns on everyone Property, etc., are some of the key elements required for certain wealth restructuring strategies aimed at making the most of all available resources to achieve optimal growth and, ultimately, to find happiness through wealth, whatever its scale.

Even though our much-admired Kiyosaki described as liability properties for personal use, and in most cases he is quite right; there are ways to turn them into assets without giving up the right to use and enjoy the property, and even generating a double return on rented properties. And, of course, all this whilst maximising the potential for sustained growth in property values over the medium and long term. If I may Mr Kiyosaki.

Yours sincerely, Global Counsellor y Gurús Mundi.

P.S. We’ve run into trouble with the Church. I have a feeling this post is going to get quite a few comments…

Why are we in a credit crisis? Why has it come to the point where subprime mortgages are being securitised? Basically, because of the thirst inversopata from both institutions and private individuals. This demand for paper, which far exceeds the borrowing capacity of traditional issuers, has led to the financos the creation of AAA alternative. The tightening of the interbank liquidity market has exacerbated the negative outlook. And the accumulation of reserves by Asian central banks – which have played a decisive role in the financial landscape for the past decade – was not the most favourable backdrop for entering such a turbulent phase.

But let’s try to break down the components of this crisis: Wall Street christened this creation alternative AAA-rated debt such as structures in which the underlying asset was nothing more than junk bonds to which they added some ingenious payment rights. Their approximate 8% interest rate and the maths did the rest. These interest rates are divided into three categories: Senior, mezzanine and equity, according to their probability of default. The tranche senior, although its underlying asset generates higher interest, is traded only slightly above the yield on traditional AAA-rated debt. This ensures it can be placed on the market and, surprisingly – with the benefit of hindsight – it is also rated AAA. The debt mezzanine is attracting greater interest and is rated as still being considered investment grade. And finally, the investment bank or financial institution itself, which creates and promotes this structure, retains the radioactive waste, that is to say, the section equity, which will keep the entire facility on tenterhooks for years. It is rather like what happens when a nuclear power station suffers a major incident. Of course, this organisation can sell the waste to third parties and offload that radioactivity in true Where's Wally?.

In 2006, this phenomenon of credit securitisation reached a figure of 500,000 million dollars. Some sources say that 150,000 people are facing the risks associated with what is known as a mortgage subprime American. In the first half of 2007, the value of instruments maturing between two weeks and three months was comparable to Spain’s GDP. Although half of that amount had already matured by 16 September without any major surprises other than those already known.

Mortgages on properties in the US granted to those whom the ‘ordinary banking sector’ (I do love calling it that!) did not consider sufficiently creditworthy have largely fuelled these processes and make up the majority of the portfolios of these structured products. If we add to this the first fall in US property prices in 40 years, the result is a default rate of close to 20%. However, contrary to what one might expect, it is not the bondholders who have been the first to be affected mezzanine and equity but the senior or AAA. The reason is very simple: these are the ones with the nearest maturity dates – as we have said before, ranging from two weeks to three months. And as things stand today, in early October 2007, the outstanding bonds are still the key to what will happen to the system.

But here’s the crux of the matter: investors tend – as do we – to reinvest short-term funds in similar securities, but given the scenario of the subprime At present, lenders’ instructions are quite different. Faced with a lack of alternatives for investing the money in substitute securities, the developers and investment banks that have marketed these structures are now faced with having to repay the equivalent of Spain’s GDP in just two months. The result of this situation: Credit crisis. Added to the liquidity crunch in the international banking system – which is directly affected – is the contagion of caution (or panic) throughout the entire system and the demand for reserves from Asian central banks mentioned at the outset. The result is that central banks are obliged to inject liquidity into the system to prevent spikes in interbank rates and further caution (or panic).

Most of you readers will be thinking: «If the crisis has so far only affected maturities…’ senior Or AAA, what will happen when the mezzanine y equity?»Well, in all likelihood, the percentage of defaulted mortgage loans will rise, to the detriment of the solvency of those upcoming maturities. But risk aversion is unlikely to increase, and with it the existing liquidity crisis. We could therefore say that the collapse of the least solvent parties will affect those holding them at that time, but the impact on the system as a whole will depend solely on the panic that we are collectively unable to quell.

Where does the risk lie? In other words, which entities hold securitisations with underlying assets? mezzanine y equity? Here we must return to the article’s title: Where’s Wally? The vast array of reliable structured debt – not based on risky mortgage or even consumer loans – is so substantial and widespread that it provides the perfect environment in which to hide Wally. Furthermore, no one knows which institutions are particularly exposed, as these transactions are off-balance-sheet. The greed of financiers and investors It has allowed a corrupt Wally to change his clothes, to the point where he is no longer even recognisable by his red and white horizontally striped jumper, glasses, jeans and matching woollen hat. The very same major banks around the world could have Wallys with different appearances among their assets. And they may or may not be aware of it. That is why the reluctance to lend money to one another cannot be substantially reduced in the short to medium term. Central banks will have to continue injecting stability and bailing out specific cases of obvious illiquidity, such as Northern Rock. But these are likely always limited to smaller organisations and do not jeopardise the foundations of the system.

It may well be the very assessment of future risks in mezzanine y equity will help to mitigate its effects. If Wall Street was able to create the Beast, will certainly be able to create the Bella which will, in turn, finance current and future contraction. Although some people seem not to care in the slightest if they lose sight of Wally, as long as they have enough credit on their mobile to send a text message asking help as he explains to us Echevarri in his latest post. Perhaps if Wally were recognisable in his usual get-up, they would prefer to look the other way, as some have done for years, selling their fish with radioactive waste without the slightest shame. But the buyers of that supposedly AAA-grade fish are partly to blame for spreading the radiation we’ll have to live with for a few years.

The million-dollar question: How would the global credit system react if the mortgage crisis were to spread to Europe as well? It is true that the granting of subprime mortgages – an alternative to conventional banking – is not widespread here, but the crisis in the sector in Spain is showing us its worst side, as we are told in GurusBlog, describing that possible scenario as perfect storm.

A turbulent landscape in which the ‘smart’ currencies (the US dollar and the Japanese yen) continue their strategic standoff with the ‘tricky’ yuan. At the same time, they open up interesting diversification opportunities for European investors, as we discover José María Díaz Vallejo in *Bulls, Bears and Donkeys*.

Bloody hell, as our contributor and friend, Global Counsellor, would say: I love this game!

I read an article in today’s *Expansión* by S. Pérez entitled The tactics of fund managers, on which I simply must share a few thoughts with you all.

What’s more, Gustavo Trillo, Head of Management at JPMorgan Asset Management Spain and Portugal, acknowledges that:

“Our investment strategy has been temporarily disrupted. Before the summer, we were inclined to maintain equity holdings in our portfolios due to the favourable economic climate: the relative slowdown in the United States was offset by improved growth in the rest of the world. We felt that equities were the best risk-adjusted asset. With the crisis, stock market returns have fallen.”.

I can't believe what I'm reading! Could it really be that a director of management at an organisation Will leading firms offer their clients more than just equities and the associated fees? Will they be able to offer their clients investment alternatives where their operating income per client plummets in favour of a new asset allocation, that can safeguard the well-being of their portfolios in an environment as challenging as the current one? Will we finally see a fund manager advising investors to underweight equities in favour of the current opportunities in fixed income and alternative investments? I continue reading the article, gripped by Mr Trillo’s previous paragraph, much like someone eagerly reading the dénouement of a thriller with a happy ending.

But here are the remarks from the newly appointed Head of Management at JPMorgan Asset Management Spain. When asked whether the credit crisis will have a negative impact on equity fundamentals, he replies without a hint of hesitation:

“It doesn’t have to be irreversible.” “It will be negative, but temporary.” Trillo highlights the stance adopted by central banks, particularly the Fed, in favour of economic growth. There is a new scenario, says Trillo, and it is positive for equities. How so? «When the Fed starts cutting rates—provided it’s not because of an economic recession—the stock market performs well for twelve months. That’s why now is the time to reposition ourselves to increase our exposure to equities and focus on those markets that are likely to perform best.”

Spectacular, the show must go on. The worst thing is that when investors are told what they want to hear, they tend to believe it hook, line and sinker. If the speaker is also wearing a smart tie and works for a prestigious financial institution, their words are taken as gospel.

But it’s not all going to be pearls In this article, we also come across statements which, whilst obvious, are by no means insignificant, such as the comments by Nicolás Llanás, Skandia’s head of investment in Spain: «The crux of the matter is that we must distinguish between the sectors most affected by the credit crisis and the rest.» referring to equities. And as for fixed income: «The only way to protect yourself is by adopting a very conservative strategy, focusing on sovereign debt and investment-grade corporate bonds. »To try and boost returns a little, you could round out the portfolio with some equities.’ As I said, it goes without saying, but in our view it’s entirely sensible and reasonable. In short, a breath of fresh air amidst all this pearl although, unfortunately, they are all lumped together under the generic terms of managers, analysts, specialists, etc…

I would like to make it clear that we are not specifically advising against investing in the stock market, but rather criticising attitudes that we consider, at the very least, erratic and not sufficiently focused on the client’s best interests, with attitudes that bread for today, more wood, or the show must go on. And what is best for each investor and their family is comprehensive advice that goes far beyond the basics.

Hardly anyone now doubts that the property boom is a thing of the past. The evidence of the difficulty in selling properties has begun to make the public aware of something that many of us had already spotted and warned about almost two years ago. Back then, those reluctant to sell their excessive and unsustainable property portfolios argued: «But what are we supposed to do with the money? The bank only gives us a measly 2%.» The result of this flawed reasoning: Brick and bag, or to put it another way illiquidity and risk at the mercy of their respective cycles. Many chose to keep walking towards the abyss at the end of the property boom and increase the perceived value of their inmupossible quarter after quarter. The anchoring effect The rise in prices per square metre in recent years had clouded their judgement. They had two subjective reasons for not selling, despite the objective wisdom of capitalising on the final surge to avoid being caught in the impending downturn: the low returns on fixed-income investment alternatives; and the still-rising statistics on prices per square metre. Very few decided at that time to change their wealth management strategy; however, a significant number of our clients did agree to a change of course, although they had to endure several months of pressure and almost mockery from amfriends and acquaintances. Today, that pressure has vanished, and they derive a deep sense of satisfaction from discussing the current and future problems of the property market with their friends. Despite our efforts to convince those who sought our advice that it would soon be too late, there were quite a few who insisted that «property prices never fall». Perhaps they regarded the 1990 crisis as merely stand-by In the property price race, they were too young at the time to take an interest in property prices as investors, or they simply chose to forget all about it.

The Euribor It has risen sharply in a short space of time, but it isn't that high when compared to the interest rate history in Europe and Spain. As we pointed out in The Ferrari, diesel. Fresh orange juice. And the Euribor +0,30, we may not reach the 10.40% level of 15 years ago, but there is no guarantee that rates won’t rise further. In any case, the credit crisis has made the future of interest rates highly unpredictable in the medium and long term.

They are starting to to hear The first comments regarding the system’s ability to absorb the effects of the credit crisis. I find it truly reassuring that this is the case, although, as I mentioned to you during the tense heatwave this summer, I have always believed this to be true. Are we out of the woods yet? Not at all. I would even go so far as to say that the worst may still be to come. However, I believe the uncertainty surrounding the resilience of the vital structures of our global economy is gradually dissipating in a positive way.