Family Office - Cluster Family Office

All bets are off.

The medium to long term horizon for investors is very dark. A report by McKinsey Global Institute (download here) hits the nail on the head in concluding that investment returns in general over the next two decades (at least) will be very low. Historically well below what the markets have offered over the last 30 years, and I would add, well below what has been achieved on average over the whole of the 20th century, Great Depression included. There are plenty of reasons for this if you open your eyes and look at the numbers. Let's see. (more…)

Renting or buying?

Many would do well to tinker again with the typical interactive pages, such as the one offered by the NYT («Is it better to rent or to buy».»), to try to find out whether it would be more interesting today to buy or rent a property. As you can see if you do this exercise, the key is in the variables of the evolution of the price and rent of real estate, but above all of the income that we are able to obtain from the money in the coming years. We can also fine-tune by introducing a multitude of variables such as inflation expectations, taxes on the purchase and sale of the property, maintenance and community expenses, real estate agent's commissions, etc. Logically, the structure of this interactive website is based on the costs and format of the North American Real Estate market, but you can adapt it approximately to our real estate market.

It is difficult to foresee where real estate prices will go in Spain 5 to 10 years down the road. But even more difficult to gauge is the inflation - or deflation - to which central banks will lead us in the medium to long term, even they have no idea. And to complicate matters further, we must be aware that, depending on inflation and the price of money, financial repression (the effects of which we explained in detail in 2013) will last, penalising rentiers and other investors, or will give way to an increase in investment returns in general. And as we said, this is perhaps the most important variable in the decision to rent or buy a property at the moment. But beware, because many poorly advised investors, faced with their inability to achieve financial returns, are throwing themselves into the arms of a real estate market that still has a downward path in the medium and long term, despite the much-vaunted rebound in the short term. Especially if the national economy remains in the ICU with a galloping deficit and growing debt. Because both evils are the enemies of sustainable economic growth and hinder job creation and wage increases, which are so necessary to turn around the current downward real estate cycle that began almost a decade ago. In this New Normal, reality is very stubborn and the future is even more uncertain.

The volatility of the New Normal's volatility overturns modern portfolio theory.

According to this Fundspeople article as you will find summarised below, volatility as a moderately reliable tool for managing investment portfolios is fading in the face of the new financial normal in which we live. Inaccurate interval averaging and uncontrolled shifting correlations (or controlled by political decisions and central bank interventionism as never seen before) mean that much greater errors are being made in calculating portfolio volatility today than just 5 or 10 years ago. The term that defines this financial unpredictability is heteroscedasticity, and it is here to stay. Let's look at it:

The traditional approach to portfolio volatility is inherently limited. It is common for investors to measure historical volatility by looking at the standard deviation of interval returns over a defined period. By combining this information with historical levels of correlation between different asset classes or securities, investors seek to diversify while distancing their portfolios from irregular risk (diversifiable risk). Typically, investors do this by diversifying their exposures across multiple asset classes, sectors and regions. The modern portfolio theory approach is only effective if certain conditions are met. (more…)

Greece: The moment of truth.

The time has come. The last cartridge has already been fired, and it is none other than the reunification of the principal payments that Greece owes to the IMF for the month of June until the last day of the month. In other words, 30 June is the moment of truth, since all possible rabbits have already been pulled out of the chisteras of the euro-bureaucrats in these almost 3 years of Greek agony.

Yesterday it was requested in extremis that the June maturities, starting today on the 5th and followed by another due date on the 12th, be combined into a single payment on the 30th. This was the last legally established possibility of postponement without falling into manifest default. No more. The end of the pantomime and theatrics between Varoufakis, Tsipras, the men in black, the iron hand of Dijsselbloem, Merkel and the Vaseline of Draghi and Lagarde. On the last day of June Greece will officially go bankrupt (unofficially it has been bankrupt for years), unless Germany and the rest of the «rich north» give in, i.e. pay the debts of the corrupt south, which is highly unlikely. Let us not forget that some central banks have already prepare contingencies The «Greexit» has been unspeakable for more than 3 years. (more…)

The US law that will prioritise the Client's interest

Putting their clients' interests first. Something so obvious but at the same time so difficult to find among financial advisors and bankers is what a new law promoted by the US Department of Labor is going to regulate, for the time being only advisors who specifically recommend investments for their clients' old age (retirement investments and 401k). Perhaps in time this law will also be extended to all other non-specific advice for old age or retirement, although it seems unlikely that one day we will see something similar for all other advisors/bankers/real estate salesmen, home insurance, etc. (more…)

Fixed income: The bubble of the perfect storm

Las políticas de tipos cero que se han venido sosteniendo desde los Bancos Centrales del mundo más desarrollado para evitar el colapso de la deuda, han distorsionado por completo el sistema financiero. Los efectos colaterales de regalar el precio del dinero y la barra libre para evitar que los hiperendeudados (todo el mundo desarrollado) quiebren, son letales para los que deben generar rentas. Es un escenario amable con los insolventes pero muy hostil para los inversores, que se ven abocados a prestar su dinero a cambio de míseros rendimientos ofrecidos por emisores cada vez más peligrosos e insolventes.

A medida en que el dinero de los inversores se desplaza hacia la deuda más insolvente buscando desesperadamente unos puntos de rendimiento, la burbuja en los precios de toda la deuda, tanto desarrollada como emergente y en toda su curva, se hincha más y más. Los emisores más solventes o con bancos centrales dispuestos a comprarlo todo, tienen buena parte de sus curvas de tipos ya en negativo, o sea que los inversores deben pagar por prestarles su dinero. De igual modo los emisores menos solventes viven en una nube de liquidez que les permite endeudarse más y más pagando tipos como si fuesen grandes nombres multinacionales solventes. (more…)

Banco Madrid or the reckless corralito

Banco Madrid is the first bank that the state and its regulators have let fall in this galloping debt crisis. In fact, technically speaking, it has not been allowed to fall, i.e. it has not fallen due to the absence of a bailout with state funds, as other insolvent institutions have been rescued in recent years, but rather, forceful measures have been taken to liquidate it due to its -still- alleged money laundering. What is paradoxical is therefore that the reason for the intervention and the swift liquidation of the institution is not, at least originally, due to the feared insolvency but to criminal practices of great significance.

However, there is no shortage of conjecture pointing to other motivations of a less financial or political nature, as suggested by this article from ElConfidencial,this one from lasfinanzascambian.com or such an authoritative voice as Javier Cremades, chairman of Cremades & Calvo-Sotelo and president of the International Financial Litigation Network (IFLN) in this devastating article. In fact, it is strange, to say the least, that the report of the Sepblac to remain in Minister De Guindos' drawer The report had already warned of indications of various laundering offences before the Anti-Corruption Prosecutor's Office, which had not been processed until the USA demanded that action be taken. We are not therefore dealing with crimes or malpractice that have gone unnoticed until today, but rather with suspicions and indications that the competent bodies detected as early as June last year, but which they surprisingly ignored until the US financial police have come forward. (more…)

Why does every investor need an EAFI or a Family Office?

Perhaps for those of us who are professionally engaged in it, the answer may seem obvious. Especially for those of us who have suffered for decades in our own flesh the miseries and shortcomings of private banking. It is no coincidence that, in addition to being advisors, we were, are and will continue to be essentially investors, and as such, our interests are still, unfortunately, at the antipodes of those of the banks and their misnamed advice. Having said that, let us now analyse the transcendental decisions that every investor should take to advise on the correct management of their assets.

To begin with, the ordinary investor should analyse his or her asset situation and determine whether, in addition to purely financial advice, he or she also needs tax, legal, commercial, corporate or real estate advice. In other words, they may need to put their companies/businesses in order, their real estate investments or divestments, the administration of these properties, inheritance and family matters, their investments in the stock market and in unlisted companies, the generation of the necessary income for their family or projects, optimising the taxation of all of this, etc. (more…)

It's not for not collecting, it's for not accounting.

With central banks and their QE, the debt situation in the developed world has reached a surrealistic level worthy of study. Not only because of the unprecedented size of the balance sheets of the FED, ECB, BoE, BoJ, SNB, etc., but above all because of the manipulation of accounts, which has become a macabre and dangerous norm.

Thus, the manifest insolvency of the southern states of the Eurozone is the gigantic elephant in the room of the Troika (now renamed «the 3 institutions»: EU, ECB and IMF) that all these creditors ignore without the slightest blush. The most surreal case is that of Greece, which with Syriza at the head of its government is causing panic among its European partners. And this panic is not caused by the Greek state's inability to repay its massive debt - they have known that for years - but by the new government's willingness to publicly and openly acknowledge its insolvency.. Why? Simply because recognising that Greece will never be able to pay means having to write off losses on its creditors' balance sheets. And that really panics them, since neither the European banks nor the indebtedness and budget deficits of the other Eurozone countries are in such a state that they can count not a single euro of additional losses at the moment. (more…)

The CNMV shields itself against a foreseeable collapse in fixed income.

According to this communiqué issued by the CNMV last Friday, investment funds registered in Spain for marketing will have to publish a series of warnings in addition to those set out in the current regulation. Special emphasis is placed on fixed-income funds and funds that establish a return objective, whether guaranteed or not, and structured funds. These warnings must be included in the prospectus of the funds, as well as in the DFI (Key Investor Information) and in the IPP (Periodic Public Information). In other words, no one, neither investors nor judges, can say that the CNMV is in any way responsible for the losses that any investor may incur in fixed income in the near future. The fact is that they have already seen the lion's ears when the CNMV has had to defend itself in recent years for having acted with slovenliness, incompetence and/or negligence in the pitiful issue of preferential securities. (more…)

(+34) 93 626 47 75

(+34) 91 794 19 82

Category: Family Office

All bets are off.

Renting or buying?

The volatility of the New Normal's volatility overturns modern portfolio theory.

Greece: The moment of truth.

The US law that will prioritise the Client's interest

Fixed income: The bubble of the perfect storm

Banco Madrid or the reckless corralito

Why does every investor need an EAFI or a Family Office?

It's not for not collecting, it's for not accounting.

The CNMV shields itself against a foreseeable collapse in fixed income.

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Cluster Family Office

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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?

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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