Crisis - Cluster Family Office

Peripheral bubble: The perfect storm.

Philippe Legrain is the author of several books, such as «Open World: The truth about globalisation«He has also been and is a very influential person in EU economic policy. Not for nothing has he been a senior advisor and head of the analyst team of the Bureau of European Policy Advisers for the President of the European Commission José Manuel Durao Barroso. And as such, has led the team that has directly advised the EU's strategic economic policy.

Well, from his privileged perspective, Legrain has recently published an article in the Financial Times entitled «.«Investors are ignoring eurozone risks«This is in line with our opinion, which we have reiterated in several articles about the mirage of bonanza that the markets are quoting with respect to the European peripheral economies: «...the European Union's peripheral economies are in a state of crisis.«Mátrix and the green shoots«, «The double standards of bubbles«and many others.

Below is a free translation and commentary of Legrain's article:

Peripheral bond yields are reaching bubble proportions. Markets awash with liquidity both camouflage and exacerbate long-term economic problems and insolvency. Investors and policymakers should have learned that lesson in the pre-crisis bubble years. Yet they have gone from hysterical panic to short-sighted complacency in less than two years. (more…)

The double standards of bubbles

We all shudder (or should shudder) when we contemplate the possibility that our money is invested in assets whose prices are at what is known as a «bubble», i.e. at levels far higher than their real intrinsic value, the result of unfounded speculation. Investing in bubbles is the mistake we all want to avoid at all costs, because if they burst, the losses will be irrecoverable or, at best, it will take decades to recover the value lost. Because, if the capacity of those assets to generate Value does not increase considerably, those prices at which we buy wildly will not occur again without the help of a new bubble on that same asset, which may never happen or take more years than our own investment life. Therefore, the losses we risk are permanent and not temporary. And the time it takes for our investments to recover from temporary price declines (which can occur in virtually any asset). is inversely proportional to the intrinsic value of those assets. Y is the big difference between investing well and investing badly.

(more…)

Russia's motives

A través de la siempre recomendable newsletter de John Mauldin, hemos tenido acceso a un análisis, a nuestro juicio muy interesante y revelador, que realiza Louis-Vincent Gave, de Gavekal Research, sobre los motivos que han llevado a Rusia a actuar como lo está haciendo en el conflicto de Crimea. Y también nos ayuda a comprender las claves que pueden determinar la evolución de este conflicto y la geoestrategia general que de él se derive. Vamos a tratar de resumiros los principales argumentos de este análisis, así como haceros algunas reflexiones sobre ellos: (more…)

Mátrix and the green shoots.

Some will say that the recovery of the Spanish economy is a fact, and that to say the opposite is to be prophetic, unpatriotic or worse. Moreover, the markets momentarily endorse the solvency of the Spanish economy. Yes, those same schizophrenic, inefficient and bipolar markets that good investors know how to take advantage of in the long term. And the fact is that the Mátrix in which we live is pricing assets such as Spanish debt at the prices of when Cayenne Porsches and Audis flooded Spanish cities, in the days when there was plenty of work and credit, and a shortage of workers. The news is nothing less than that the Spanish 10-year bond is trading at a paltry 3.39%, breaking records from 2006! (more…)

From Russia with (more) Courage.

13 months ago we wrote a article in which we told you about the enormous value that existed in the Russian stock market.. In it we cited some companies that were trading at extraordinarily low earnings multiples, whose businesses were very stable and therefore had a dizzying potential for revaluation. Well, the geopolitical circumstances, i.e. the botched EU/US attempt to foment a pro-European revolution in a Ukraine at least half of which is pro-Russian, have caused the semi-war conflict to affect Moscow's stock market with sharp falls, adding even more value to some of its companies.

We should not lose sight of the fact that the conflict does not directly affect Russian territory or its economy. Or at least not as much as it does the EU itself, which is as recklessly dependent on Russian oil and gas supplies as a diver is on his oxygen tank. You will get a clearer idea of what I mean by looking at the graph at the end of this article. this Gurusblog article.

It is clear, then, that it is not Russia that has the most to lose in this conflict, but the EU. And yet the Western (US-EU) strategy, in its eagerness to incorporate Ukraine into NATO and thus advance the allied military border to the very line between Ukraine and Russia, has upset the fragile balance of the government in Kiev. A once pro-Russian government, but governing a single state, and now non-existent, unrecognised by the east and southeast (Russian-speaking) and financially bankrupt. Thus the secession of Ukraine into two antagonistic camps, pro-Russian and pro-Western, seems unstoppable. (more…)

A one-off wealth levy.

It has been almost a year since we had already warned that the council of German experts advising Chancellor Merkel recommended that the leaders of southern Europe confiscate a portion of the value of property from owners in the EU’s periphery in order to prevent the collapse of the peripheral financial system. At that time, this body – known as the «five wise men» – argued that whenever a bailout of banks or southern European states was necessary, it should be carried out internally (a «bail-in»), that is, using money from the citizens themselves living in the countries in distress. And that confiscating a proportion of the value of property was the easiest, most practical and simplest way to obtain the money needed to prevent the collapse of peripheral states and the financial system. This was because doing it the Cypriot way – by confiscating a portion of bank accounts – caused greater public alarm, and it was also easier for ‘the targets’ to avoid confiscation by transferring the money out of the country (as the better-advised Cypriots did). Property, on the other hand, is tied up; it cannot be transferred overnight to Luxembourg, Switzerland or Germany, and at the same time it is viewed more favourably ~~to steal~~ to confiscate property from property owners – who are presumed to have greater wealth – rather than from savers or investors who live in rented accommodation. (more…)

The Age of Central Banks

It seems that the pieces of the ‘New Normal’ jigsaw are starting to fall into place. But, as is to be expected given that this is a ‘New Normal’, the way these pieces fit together is currently far less stable and orderly than in the ‘Old Normal’. And what may seem today like a completed part of the jigsaw may, by tomorrow, once again prove to be a state of great uncertainty and chaos.

The key difference between this new era and the previous one is, of course, the size of the balance sheets of all the central banks in developed economies: the Fed, the BoE, the BoJ and, to a lesser extent so far, the ECB. The headlong rush that quantitative easing (QE) represents is driving up the market prices of virtually all assets and directly related markets. And this reality is as striking as it is fleeting, since the mass printing of money has as much influence on asset prices as it is unsustainable, given that the tap on QE will inevitably have to be turned off at some point in the not-too-distant future. (more…)

Financial Repression: A lifeline for debtors and a death sentence for investors.

Many people will already be familiar with the term ‘financial repression’, but for most it will still be something unfamiliar – just another technical term in these times when we have learnt to talk quite naturally about subprime mortgages, deleveraging, the ‘new normal’ or the now overused term ‘stagflation’. The scenario in which we find ourselves – and in which we will continue to operate over the coming years – is one of ‘financial repression’. And this has been agreed upon by those who once dominated the economy but are now desperately trying not to drown in their own vomit – that is to say, their almost infinite debt: Europe, the USA and Japan. (more…)

Spain, recovery or lies?

We cannot ignore articles such as the one just published by Roberto Centeno in ElConfidencial.com, Neither for its forcefulness nor for its coincidence with many of the arguments that we have been giving since Cluster Family Office. Before going into the details, it is worth remembering that Centeno was CEO of companies such as Butano, Enagas, Campsa and is currently Chairman of Eneroil. He also holds a PhD in Economics from the Complutense University of Madrid and is Professor of Economics at the School of Mining Engineering of the UPM.

Although we have linked to the original article at the top of this post, we will summarise some of the arguments here. Be prepared for the traumatic shock of a few slaps of reality, such as we have been warning constantly, again and again. But as in the Matrix movie, most prefer to take the blue pill of the declarations and versions of the virtual reality of recovery, which governments try to hammer into our heads. However, we are already we recommended you to take the red pill 5 years ago. How time flies....: (more…)

The government decides that we will all guarantee 50 billion more to Spanish banks.

All of us are going to pay out of our own pockets. That is the decision taken unilaterally by the government. Without consultation, without objections, without light or stenographers, without shame. And the fact is that, as the accounting trap that converted the banks' tax credits into assets has gone wrong because the imminent Basel III regulations prohibit such a martingale, now the Government has decided to convert these future tax benefits of the banks directly into assets guaranteed by the State.

50 billion euros - that's nothing - will remain on the balance sheets of Spanish banks as assets, since otherwise Basel III would oblige the tax credits to be counted for what they are, i.e. a potential future and uncertain saving, and only if the bank is still standing after a few years and also makes profits that can amortise these tax credits. (more…)

(+34) 93 626 47 75

(+34) 91 794 19 82

Category: Crisis

Peripheral bubble: The perfect storm.

The double standards of bubbles

Russia's motives

Mátrix and the green shoots.

From Russia with (more) Courage.

A one-off wealth levy.

The Age of Central Banks

Financial Repression: A lifeline for debtors and a death sentence for investors.

Spain, recovery or lies?

The government decides that we will all guarantee 50 billion more to Spanish banks.

Shall we help you search?

Cluster Family Office

Do you need help in capital and wealth management?

How can I avoid the negative effects that my fortune may have on my children?

How and when should I talk to my children about family wealth, and what relationship should they have with money throughout their adolescence?

How can I measure the real risks of my investments and protect my assets adequately?

Do I have sufficient liquidity and stable income to cover my needs on a permanent basis?

(+34) 93 626 47 75

(+34) 91 794 19 82

Category: Crisis

Peripheral bubble: The perfect storm.

The double standards of bubbles

Russia's motives

Mátrix and the green shoots.

From Russia with (more) Courage.

A one-off wealth levy.

The Age of Central Banks

Financial Repression: A lifeline for debtors and a death sentence for investors.

Spain, recovery or lies?

The government decides that we will all guarantee 50 billion more to Spanish banks.

Shall we help you search?

Cluster Family Office

Do you need help in capital and wealth management?

How can I avoid the negative effects that my fortune may have on my children?

How and when should I talk to my children about family wealth, and what relationship should they have with money throughout their adolescence?

How can I measure the real risks of my investments and protect my assets adequately?

Do I have sufficient liquidity and stable income to cover my needs on a permanent basis?

(+34) 93 626 47 75

(+34) 91 794 19 82

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