Estrategia - Cluster Family Office

How much will those who invest today earn?

For those of you for whom the trees of panic and volatility prevent you from seeing the forest of opportunities and returns that lie in the palm of your hands, let us explain Nick Maggiulli's simple, mathematical analysis of Ritholtz Wealth, which we fully endorse.

The crux of the matter is to shed light on asset purchases during times of panic. But first let us put the current crash in context.

As of today, the low for the Dow Jones has occurred on 23 March 2020 and has been 35% from its highs, making it one of the worst months in the history of the US stock market.

If we analyse all the crashes above 30% since 1915, we see that this crash is one of the fastest and fastest we have ever had.

Moreover, while in the past we see the little red dot that signals the floor, at this moment we still do not know if we have already seen the low of last week or if it is still to come in this coronavirus crash.

Nevertheless, there is no doubt that these are golden times for investors buying equities now. Every euro or dollar we invest in today's markets will grow much more than those invested in previous months as soon as the markets recover. Because we all assume that sooner or later the markets will recover and humanity as a whole will eventually beat this virus as it has beaten other health crises before, right?

To demonstrate that every dollar invested today will yield much more than those invested before the crash, let us imagine that we decide to invest $100 every month in the US stock market from September 1929 to November 1954 (crash of 1929 and its subsequent long recovery).

If we had followed this strategy, this is what each $100 packet would have earned (including dividends and adjusted for inflation) until the recovery was completed in November 1954:

As you can see, the closer we bought to the low in the summer of 1932, the greater the long term benefit of that purchase. Each $100 invested at those lows grew $1200, which is three times as much as the $100 packs bought in 1930 ($400).

However, even if we look at the other falls above 30% shown in the first chart, we still see much higher profits if we buy during times of major panic and market declines:

This chart shows that buying near crashes (even if we don't hit their lows exactly) provides between 50 and 100% more profit compared to an investment at other times. That means that your $100 will grow $150 or $200 more (adjusted for inflation) when the market has recovered again.

But where does such a spectacular increase come from? Well, besides being intuitive, its origin lies in simple mathematics: Every percentage loss requires a higher percentage gain to compensate for it. At this point in the film, it should not escape anyone's attention that a 10% fall requires an 11,11% rise to recover that loss. In the same way that a 20% loss requires a 25% rise and a 50% fall requires a 100% rise. You can see this exponential relationship very clearly in the graph below:

Let us now see what the chart would look like adapting it to the fall in the markets up to last week (-33%) and see the profit that would be needed to recover it:

If we do not see new lows, the recovery needed is 50%. And what a coincidence, for every $100 invested now they will generate $150 (a further 50%) when the recovery materialises.

But despite the obvious benefit of buying during the current panic, most investors are not doing so at all. Including those who have a lot of cash, either because they had it in other assets or because they sold during the crash in panic. And thank goodness they don't, because if they did, the crashes would no longer be crashes, and therefore the opportunities for good investors would vanish before they materialised. Excuses for not doing so can be diverse and very convincing for less good investors. Among them are «this time it's different» or «we don't know if it will fall further». As if a good investor is only one who is lucky enough to buy just on the day when the markets quote what will be the historic low of that crash. Remember that in graph 2 we talk about buying "as close as possible" to the low, without aiming to buy right on the bull's eye.

Let us now honestly answer the following question: How long do you think it will take for the markets to recover to the pre-pandemic highs? A month, a year, a decade? How long will it take for the indices to recover from that 33% decline? Answer yourselves.

Based on that answer, let us return again to the expected annual return in the future for our current investment. The equation is as follows:

Expected annual return = (1 + % Gain needed to recover)^(1/Number of years to recovery) - 1

But since we know that the percentage gain needed to recover is 50%, we can simplify it as follows:

Expected annual return = (1.5)^(1/Number of years to recovery) - 1

Therefore, if you think that the market will take time to recover:

1 year, then your expected annual return = 50%
2 years, then your expected annual return = 22%
3 years, then your expected annual return = 14%
4 years, then your expected annual return = 11%
5 years, then your expected annual return = 8%

Even taking 5 years for a full recovery, the market would be offering you the same return as the US stock market has historically yielded. Nick Maggiulli asked this same question on twitter and found that two out of three of his poll participants believe that the recovery will come within 3 years.

That means that if the majority of respondents are correct, any investment made now, is going to yield between 14% and 50% annualised until the market recovers. Think about what this means. Investors who choose not to buy at this time are either giving up an annualised return in excess of 14% for the next 3 years, or they believe that the market will take more than 5 years to recover and despise annualised returns of less than 8%. In short, the only reasonable reason not to do so is if you already have all your money invested and have no more at the moment (time to sell grandma to invest more in the stock market, as he said...).

Of course, new black swans may occur on the planet, delaying the recovery of markets, as has been the case for decades in Japan, for example. But it seems unlikely, especially in efficient economies such as the US and growing economies such as China and the other Asian economic orbit. Moreover, note that throughout the article we are referring to the market, i.e. the indices. But imagine the figures that will be achieved by those who also have the possibility of investing in actively managed funds that significantly outperform the benchmark indices. In other words, those who invest in portfolios where the management team selects the companies with the greatest potential for recovery at this time (Healthcare sector in China, for example). And we will not tire of repeating that, although the vast majority of actively managed funds do not outperform their benchmarks, especially within the limited universe of funds marketed in Spain, there are world-renowned managers who have been doing so for decades. Unfortunately, however, they are not easily accessible to the average Spanish investor, as we explain in detail in «Why don't large international investors invest in the same funds as you?«.

As he once said Jim O'Shaughnesy, Many people confuse possibility with probability, and the two are almost opposites. Keep this in mind as you face new challenges that will come in these days.

One of the things that still surprises me is to see how simple mathematics can help us to clarify the thickets in which our own minds entangle us. Our fears and passions are our worst ally in the face of the crash caused by the covid19 virus. Objective figures are certainly a glimmer of sanity to handle Mr. Market's schizophrenia. And the numbers show us that, assuming the market (and even more so our well selected stocks by the world's best managers) will recover in the coming quarters or semesters, the returns we will get are very, very attractive. And therefore, any hypothetical new low in the stock markets would be nothing more than an additional buying opportunity and even higher profits. Fortunately for a minority, the majority do not see it this way and are still waiting to see the floor, like those who are permanently waiting to catch the next train, which will probably be an AVE train that does not stop at their particular station.

Investing in the midst of a pandemic

After the much read and commented in networks «The lies of the Spanish government and health authorities about the coronavirus«In the third instalment of articles dedicated to the global crisis caused by the SARS-Cov-2 coronavirus and Covid-19 disease. In our first article entitled «Realistic coronavirus figures and the opportunities of an unfortunate crisis»We were already anticipating this: The effects on the entire world economy are devastating in the short term. But only in the short term since the infection has a clear expiry date, Unlike other geopolitical, military or social conflicts, which also generate panic in the markets. Y It is this temporality that should awaken the good investor in us and change our fear for the famous greed that Buffett and other investment greats recommend when the rest of us panic.

In this pandemic, which is now beginning to sweep the West, the investment opportunity is one of those that are often called once in a life time, This is one of those rare occasions in the course of a lifetime of investing. This is because, although there is always room for doubt due to imponderables that can complicate scenarios, business activity will probably recover to pre-pandemic levels in the medium term at best. Obviously these imponderables include, for example, a mutation that makes the virus more resistant and/or deadly, war conflicts that add more instability to the world order, or other health crises that could arise and coincide in time with the current pandemic. But if none of these things happen, the recovery in the tone of the economy will be no more than a few months. a couple of quarters, And what should a few quarters mean on the horizon for a good investor? Nothing.

Therefore, it's time to go shopping (or hunting, as Buffett would say) and take advantage of the fact that the results of countless good companies around the world are going to be temporarily and exceptionally bad. Because the fall in profits and turnover will not be due to poor business performance but to a lull in global economic activity that is as exceptional as it is temporary. If we talk about airlines, we will find some at half the price of last year. If we look at the energy transport sector, the falls and fluctuations have been insane. And what can we say about the China's health sector, The winning horses, for example, have an exceptional horizon ahead of them because they will be the almost exclusive providers of pandemic and post-pandemic material on a planetary level.

But how to find these pearls with such a promising future? Decades ago we learned that it is much more efficient to select the best international fund managers than trying to analyse the best companies on the planet. The knowledge that good local management teams will have of the best companies in their respective countries (Vietnam, India, Brazil, China, etc.) will always be infinitely superior to ours or to that of any multinational management company that tries to make its selection through a manager located in London or New York, even if its forefathers were originally from those countries. We would therefore be well advised to invest our money now in those investment funds who have local and comprehensive knowledge of China (or the specific health sector as mentioned above) or any other country.

And those good local managers will not only choose good businesses, but also cheap ones, with bright prospects for recovery. Because if we think that a company may be losing a whole quarter of its turnover due to the pandemic, for example, and we buy it now at a panic price, its growth prospects in terms of turnover over the next 4 or 6 quarters will be spectacular. In other words, we will be investing with Value criteria but with a Growth potential that is as exceptional as it is profitable. If we add to this the fact that we will be selecting companies whose business is based on taking advantage of growing economies and demographics such as those in Asia, the tailwind will further boost our future profits.

As the image on the left hand side of the Cobas March Newsletter, It is now, when our neighbours in the 3rd 5th are beginning to realise that perhaps the coronavirus is not just a simple flu, that we should invest without fear and give free rein to our good investor's greed. Now, when our less informed friends and acquaintances are alarmed by the market crashes that are all over the TV news. Just like the lift man who recommended shares to Groucho Marx. in this essential book, or Rockefeller's shoeshine boy invested in the stock market. In other words, when the less informed panic about the coronavirus epidemic and the markets go into a tailspin, it is the most appropriate time to invest in the quality assets that have been exaggeratedly depreciated in recent days. It is perfectly possible, as we have already said, that things will get even more complicated, and that the investments we make today will temporarily lose an additional 20% or 30%. But if they do, and our investments are of quality and made with the good judgement of the best fund managers on the planet, it will be for a very short time. On the other hand, if we remain fearful out of the market, it is likely that we will not see that additional 20-30% fall but a sharp recovery and miss out on much of the upside, having blown this one. «once in a life time».» opportunity.

We know that many will read this article but will not follow the recommendation, as it is easy to understand that you have to buy when everyone else is selling, but it is difficult to dare to put it into practice. And thanks to the majority who won't dare and those who don't even agree with our arguments, a few of us will be able to make substantial profits in the coming years.

Realistic Coronavirus figures and the opportunities of an unfortunate crisis.

It is not a question of being tremendists but simply of having a minimum of critical sense in the face of the barbarities that media, politicians and other official agencies in many Western countries proclaim according to their own interests and/or ignorance. For example, the 2% coronavirus mortality figure that is being bandied about is simply not realistic. And to realise this you just need to know how to multiply and divide as well as to know the reality.

Although it may come as a surprise to many, the Wikipedia (graph below) is one of the sources with the most up-to-date and up-to-date data on the progression of the pandemic. We will take for granted the figures officially published by China to see that the mortality rate is probably much higher than the 2% mentioned, because if we think that the real figures are even worse (what other reason would the Chinese authorities have to manipulate them), the situation and the outlook would be even more terrifying. In the daily updates of those infected by the new or novel coronavirus we see a significant slowdown in the last few days, with the percentage going from over 30% to 7.7% in the last 10 days.

The same is true for the number of deaths, whose increase is also seen to slow down from levels above 35% to the current 12%. Obviously the mortality of an epidemic should be calculated as the number of deaths relative to the total number of infected, and this is what those who claim that the mortality rate of the new coronavirus (2019-nCoV) is around 2% are miscalculating. But it should not escape anyone's attention that they are making a gross error in calculating deaths to date with those infected to date, since many of those infected counted today will, unfortunately, die in the next few days. In other words, the mortality rate should be calculated when the epidemic has already passed, because if we do so during the (current) expansion period, we will be assuming that none of those currently alive will die. Such a basic error can hardly be attributed to the ignorance of those who use the 2% mortality rate as an argument for the inhabitants of the planet to remain unconcerned and live a normal life. The death toll today already exceeds the death toll from SARS. This epidemic only infected 8,000 people in 9 months, while in China alone there are already more than 37,000 officially infected in barely 2 months, and with a real mortality rate that we will now try to guess.

It is obviously very difficult to guess how many of those infected today will die in the next few days, and even more difficult to guess how many days they will survive. But just thinking that a fifth of the seriously ill (with altered vitals, i.e. really very sick), who currently account for almost 17% of those infected today, may end up dying in the next 4 days, let's say, and adding those who have already died, the calculation of the mortality rate shoots up to levels above 4%. And that is not counting the fact that none of those infected during the next 4 days will die in the following 4 days... We are therefore facing a pandemic whose mortality rate can only be calculated in retrospect, but which all indications are that it will probably double the 2% proclaimed by most of the media. Remember that the death rate from influenza is much lower than 1%, there is a relatively effective vaccine, and yet it still causes hundreds of thousands of deaths each year worldwide. If we add to this realistic mortality rate of this new coronavirus the chilling ease of contagion it is demonstrating and the fact that the vaccine has yet to arrive, the explosive cocktail is served. Moreover, imagine how this infection will behave in societies adjacent to China such as, for example Vietnam, Myanmar, Laos, Thailand, Philippines, India, Indonesia, Malaysia, etc., with 1.5 billion inhabitants whose hygiene, sanitation and epidemiological control systems are far more precarious than those of today's China. There, the proliferation of the virus cannot be controlled, as it is happening in China according to the official figures of the last few days, but only an accessible and timely medication or vaccine would prevent extravagant mortality.

It is worth reading the very interesting analysis by Tyler Durden on Zerohedge, The report rightly points out that in a country like the US itself, the situation could also become very complicated due to the high cost of the health system for the population that cannot afford good private insurance. This would lead the infected Americans to avoid using health services, with the consequent lack of control of the epidemic, despite being one of the societies with the highest per capita income on the planet. Moreover, in most Western democracies, governments would be far more reluctant than the Chinese government to harm their domestic economies to try to control the epidemic. By definition and unfortunately, most Western democracies would be more concerned about bowing to their lobbies and taking populist measures that would not jeopardise their re-election, the economy, or their partisan interests, than they would be about ordering courageous but unpopular measures. We see daily examples of health ministers and mayors downplaying the risks and calling for business as usual so that nothing disturbs the fragile economic balance in southern Europe. Without going any further, it is shameful that it is the companies themselves who have to suspend their participation in the Mobile World Congress in Barcelona, while the local authorities continue to insist on convincing them not to cancel their reservations for hotels, restaurants, chauffeurs and other unmentionable expenses.

That said, we should obviously not pin our hopes on controlling the pandemic globally, but on effective treatments and subsequent vaccines that can be made available to the world's population in the coming weeks. Because if we do not have those drugs for several months, the pandemic could reach our own neighbourhoods and claim millions of victims, especially in Asia. But it is not enough to discover an effective drug or vaccine; we must also be able to produce it on a mass scale and at a cost that is affordable for the vast majority of the world's population and/or states.

Health sector companies such as Inovio, China, a leader in research into viruses such as Ebola, MERS and Zika, is already testing potential vaccines for 2019-nCoV in animals. And probably the criticised «shortcuts» in international clinical trial protocols that China is surely taking will accelerate the achievement of an effective treatment that will save millions of lives around the world. Because given the extremely high rate of spread and mortality of this coronavirus, time is more than gold, it is Life.

But how is this pandemic affecting the global economy? Well, we are just seeing the tip of the iceberg of the destructive effects on economic growth. Obviously the first on the list to be affected is China's economy. But the cascading effect can be devastating because of the interconnectedness between Chinese products and those of the rest of the world. Just look at the Chinese components (often internal and invisible parts) around you, and think that they are already materially temporarily no longer being produced.

That word, the temporality, is the key to turning an unfortunate global health crisis into an opportunity. Because even if the treatment or vaccine arrives in time to prevent the global epidemic, the crisis in China is already an inevitable fact. But the fact that a large part of the country has already collapsed, with businesses closed, transport blocked and people locked in their homes, does not mean that this situation cannot be reversed in the coming quarters, but precisely means that China's resurgence is closer. Because, unlike other crises such as a trade war, an economic embargo, a military war or any other geopolitical conflict, this epidemic is not a crisis that can be reversed in the coming quarters. has an expiry date. This is not only because the infection will generate a natural peak and will eventually control itself, but also because any vaccination or medication will drastically shorten this period and the mortality it entails, minimising its effects and invigorating recovery.

Assuming that such medication or vaccine arrives in time to prevent a pandemic severely affecting Europe and America, what will be the post-epidemic scenario in Asia? Natural epidemiological timing indicates that a return to normalcy in China may come much sooner than in its neighbours. Moreover, China has far more resources, discipline and health structure to effectively medicate its population when the time comes. The Chinese state's strong political will and economic capacity to recover its economy through financial stimulus, which may even dwarf the QE carried out by Western central banks, will also be decisive. We should therefore expect a massive post-epidemic response from Xi Jinping's government. No effort will be spared to help the Chinese economy make up for lost time, which, let us remember, will not last more than a couple of quarters, given that the treatments (Chinese or Western) will not take long to appear and will be available to whoever pays for them. It is therefore foreseeable that during the second half of 2020 (or even earlier) the recovery of the Chinese economy will be underway, and it will be a matter of state and national pride to return to the path of dominance of the world economy to which the Chinese seem to be destined. Moreover, the trade war with the US has not spilled blood into the river, as we have already predicted almost a year ago, so there is even less reason for pessimism about China's economic recovery.

Therefore, in addition to preparing ourselves and our environment for the worst-case scenario of the pandemic (remember that the more than likely current mortality rate is much higher than 2% as we have seen), we would do well to position our investments to take the best advantage of this textbook black swan called the coronavirus. We should therefore take advantage of possible falls in the Asian markets - especially the sector healthcare Chinese- to buy shares in companies that will rise from the ashes of this epidemic with a strength and pride that we are unlikely to see in the West. Significantly, however, share price falls to date have been surprisingly modest, perhaps in anticipation of such a stunning economic recovery, or perhaps the result of Mr. Market's chronic schizophrenia, who knows.

We have long seen Asia's growing economies as the only robust economic growth niche on the planet, and so we are now looking to Asia's growing economies as the world's only economic growth niche. we have said it repeatedly. Only there are the two indispensable factors for economic growth: high productivity; and a demography with a majority of productive young people and a minority of extractive retirees. It is no coincidence that a good number of funds in which we invest are managed in Asia and by local managers. That is why this unfortunate black swan comes, like all of them, accompanied by an opportunity that is rare in the course of an investment life. For the moment the Asian markets seem oblivious to the blockade in the making, and if the pharmacological solution arrives before the stock markets fall, so much the better. But if we see significant price declines in the coming weeks, it will certainly be an opportunity to buy and overweight Asian companies, especially in China, with huge potential in the coming semesters and years.

Paula Leyes, the young Spaniard admitted to the best universities in the world.

News, Strategy, Reflection
01/31/2020

Paula Leyes obtuvo un 10 en Bachillerato y estudia un doble grado de Matemáticas e Informática en la Universidad de Harvard. Tiene 18 años y es una de los cuatro alumnos españoles que se han matriculado en Harvard este curso. Todo un récord, ya que jamás antes tantos españoles habían accedido iniciar sus carreras en esta prestigiosa universidad estadounidense, que cada año admite solo a unos 1.6oo nuevos estudiantes de todo el mundo. Sólo un 4% de los candidatos acaban siendo admitidos, y creedme si os digo que el 96% restante también son estudiantes excelentes y fuera de serie, la mayoría de los cuales obtienen también la nota máxima durante el rigurosísimo proceso de selección. Pero además, a Paula, nada menos que otras 14 universidades prestigiosísimas de Estados Unidos también le han ofrecido sus respectivas cartas de admisión, entre ellas Stanford, Princeton, Columbia y Georgetown.

Paula es evidentemente un caso de éxito excepcional pero ¿significa esto que solamente los chicos y chicas con notas excelentes y/o con mucho dinero pueden ir a estudiar a universidades norteamericanas? NO, en absoluto. Tan solo un escalón por debajo de esas universidades elitistas existe un abanico de centenares de universidades magníficas donde cualquier alumno con promedios de 6, 7 u 8 y un presupuesto razonable puede acceder, si así lo quiere realmente y dispone del asesoramiento adecuado para estudiar en los Estados Unidos.

Con dicho asesoramiento se llevará de la mano a las familias interesadas a través de todo el proceso de aplicación a las universidades. Un largo camino que debe empezarse entre 15 y 18 meses antes de acabar el 2º de Bachillerato, es decir que debemos comenzar la preparación del alumno/a para los exámenes de acceso norteamericanos durante la primera mitad de 1º de Bachillerato.

Pero, ¿qué ocurre si se nos ha pasado el arroz y ya estamos cursando 2º de bachillerato? Pues no es el fin de las esperanzas de estudiar en USA. Simplemente habrá que correr más, y probablemente se deba aplicar para iniciar la universidad en el Spring Term y no en el Fall Term. Es decir, que todavía está a tiempo y no se va a perder todo un curso sino simplemente comenzará un cuatrimestre después. Porque en las universidades norteamericanas cada cuatrimestre llegan nuevos alumnos/as para empezar sus carreras. La flexibilidad, tanto respecto al calendario como respecto a los cambios de una carrera a otra, convalidando créditos, es enorme en el sistema universitario de los EE.UU.

Hoy en día más y más colegios e institutos españoles ofrecen cursar trimestres o cursos enteros de secundaria e incluso primaria en escuelas y high schools públicos y privados en USA. Está de moda enviar a nuestros hijos a escuelas americanas acogidos por familias locales. Y ese sistema en muchos casos supone una experiencia personal poco agradable. Un sacrificio personal de toda la familia que lleva a la mayoría de alumnos a no querer volver en absoluto a los EE.UU. para cursar sus estudios universitarios, según confiesan off the record algunas empresas especializadas en vender estos cursos. Es decir, un resultado contrario a lo que precisamente se buscaba, que es una integración y aclimatación a un entorno estudiantil y de vida norteamericano, para que quieran después graduarse en universidades de USA. Por eso nuestra recomendación es guardar el dinero para cuando deban iniciar la universidad, ya que el nivel académico del high school en norteamérica es inferior al nuestro. En cambio, la formación académica, la vida universitaria y los recursos económicos de los que disponen las universidades en USA es muy superior a nuestro sistema universitario, nos guste o no reconocerlo.

¿Pero como vamos a «acostumbrar» a nuestros hijos a un entorno norteamericano si no les hemos llevado previamente a estudiar allí? Sin ese rodaje o inmersión temporal previa, es poco probable que un adolescente de 16-17 años de repente quiera dejar su entorno conocido en España para irse a una universidad americana. Desde nuestra experiancia como consultores (y padres de alumnos que han pasado por ese proceso y estudian actualmente en universidades norteamericanas) nuestra recomendación es clara: Utilizar algunos veranos de su pre-adolescencia para enviarles a campamentos de 2, 3 o hasta 7 semanas en USA. Esos summer camps, además de ser entornos de naturaleza exuberante, saludables y tremendamente divertidos (foto inferior), suponen la inmersión ideal en un ambiente norteamericano perfecto, donde el deporte y las actividades de ocio conforman la agenda diaria, y que les hará desear con todas sus fuerzas ser admitidos en universidades norteamericanas en el futuro. Además, estas estancias veraniegas cuestan bastante menos que los cursos de secundaria en high schools americanos que hoy en día ofrecen tantas y tantas escuelas españolas.

Por tanto, ya tenemos a nuestros hijos aclimatados, integrados y motivados para querer estudiar sus carreras universitarias en los EE.UU. Ahora es el momento de hacerse la pregunta del millón:

¿Cuanto cuesta enviar a los hijos a estudiar en una universidad norteamericana? Ya lo explicamos detalladamente en «¿Puedo enviar a mis hijos a estudiar a una Universidad en los EE.UU.?», pero a continuación os copiamos de nuevo los costes totales, mínimos y máximos anuales, segmentados:

Tuition fees:
- Between €10,000 and €55,000 depending on the prestige and quality of the university.
Cost of room and board:
- Between 8 and 15 thousand €.
Books, materials, travel and miscellaneous expenses:
- Between 2 and 3 thousand euros
Health insurance for international students:
- Between €1,000 and €2,000

Fijaos que los costes de habitación y comidas dentro de los propios campus universitarios son comparables a lo que nos costaría enviar a nuestros hijos a estudiar a cualquier universidad española lejos de nuestra propia ciudad. O sea que cuesta lo mismo que la manutención en Madrid, Barcelona o cualquier otra ciudad europea (o incluso menos).

En cuanto a los costes de matrícula, como véis más arriba, son muy variables en función del prestigio, localización, etc. Pero para hacernos una idea, los precios parten de lo que costaría cualquier universidad privada española, aunque la mayoría de universidades de buen nivel rondan los 18-20.000 euros/año.

¿Puedes conseguir una beca para estudiar en la universidad en EE.UU.? El universo de becas y ayudas es extensísimo, por lo que dependiendo del nivel académico y/o deportivo del alumno, se pueden muy fácilmente reducir dichos costes totales. Obviamente para ello el alumno debe destacar respecto a la mayoría de compañeros/as con los que va a compartir universidad. Además existen otras ayudas económicas que no dependen ni del nivel deportivo ni académico, y que solo de la mano de unos consultores expertos se podrán exprimir. Por ejemplo, algunas universidades ofrecen becas simplemente por el hecho de que la familia del alumno resida en una ciudad hermandada con la de la universidad, o por cumplir características y requisitos personales variopintos.

No obstante, aún sin ningún tipo de beca ni ayuda, y con un expediente académico muy normalito (promedio de 6 sobre 10 por ejemplo) se pueden encontrar universidades norteamericanas con un coste desde los 20-25.000 euros anuales, incluyendo TODO (matrícula, vivienda, comidas, libros, seguros, etc.).

Una vez aclarados los costes, hablemos del porqué es recomendable enviar a nuestros hijos a graduarse en universidades norteamericanas. Y me vais a permitir que ahora os hable, no sólo como US university admissions consultant, sino también desde la perspectiva de padre de dos hijos que estudian actualmente en sendas universidades norteamericanas.

En los EE.UU. lo habitual es que los hijos se marchen de casa para vivir en la universidad con 17 años y sólo regresen a casa durante sus vacaciones de Navidad y de verano. De hecho la mayoría de alumnos norteamericanos suelen elegir universidades suficientemente lejos de sus domicilios como para no tener que ir todos los viernes a casa y perderse así el ambiente del campus los fines de semana. Además como, a diferencia de España, el paro allí es prácticamente inexistente, lo habitual es que una vez graduados empalmen sus estudios con su vida profesional (y amorosa) y ya no vuelvan a vivir permanentemente con sus padres en el futuro. Por eso allí no es nada habitual ver hijos en edad universitaria y post-universitaria que todavía no hayan volado del nido, como sí que sucede tristemente en España, con jóvenes de 30, 35 e incluso más años de edad sin posibilidad (y algunos ni siquiera voluntad) de emanciparse.

La experiencia que supone para un adolescente de 17 años marcharse de casa para vivir un ambiente 100% universitario las 24h del día, los 7 días de la semana en los USA, marca absolutamente la diferencia en la madurez de la persona en ese paso de adolescentes a jóvenes. Como padres no sólo les estaremos brindando a nuestros hijos la posibilidad de graduarse con títulos universitarios que les abrirán las puertas allá donde vayan (mucho más que los títulos españoles), sino que les estaremos ofreciendo la mejor manera de aprender a volar por el mundo, de emanciparse no solo física sino también mentalmente. En definitiva, les estaremos preparando para moverse sin problemas por un mundo global como nunca hemos visto.

En cualquier entrevista de trabajo suele verse una enorme diferencia entre los candidatos que han estudiado en la universidad de su propia ciudad mientras siguen viviendo con papá y mamá, y los que lo han hecho en universidades en el extranjero viviendo rodeados de otros estudiantes y lejos de sus padres. En la mayoría de casos los primeros tienen menos posibilidades de conseguir el puesto, ya que la propia entrevista de trabajo les situa fuera de su zona de confort, a lo cual no están en absoluto acostumbrados y todo les viene grande. Y no digamos si además el puesto al que optan les va a exigir viajar a menudo o vivir en el extranjero. Sin embargo, para los que llevan fuera de casa desde los 17 años y se han graduado en buenas universidades como las de USA, una entrevista de trabajo no es más que otro desafío de los muchos que han tenido que superar desde hace varios años. La diferencia es abismal y evidente para cualquier responsable de recursos humanos o empleador.

Es cierto que enviar a los hijos a the best American universities tiene un coste que no todas las familias pueden permitirse (aunque como hemos visto es mucho más asequible de lo que muchos creían). Pero darles una herencia como esa, en especie, les va a resultar infinitamente más útil para el éxito en sus vidas que por ejemplo heredar un pisito en el pueblo, o medio piso en la capital, o el dinero suficiente para comprarlo. Sin embargo, muchos padres siguen aún pensando en dar sus ahorros a sus hijos en forma de inmuebles, que difícilmente podrán mantener si su currículum no les facilita conseguir un buen trabajo. O se los dan en efectivo, con el riesgo de que lo dilapiden en cualquier capricho para ellos mismos o para sus parejas (viajes, coches, etc.), en lugar de usarlo unos años antes en una formación que va a determinar de su futuro éxito.
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Ya lo dijo el economista Gay de Liébana en el artículo ya citado: Tal y como está el panorama económico para los jóvenes en España, las familias que puedan enviar a sus hijos a estudiar a universidades prestigiosas en países receptores de talento les harán un enorme favor, puesto que tendrán muchas más herramientas y contactos para brillar en su futuro profesional. Por el contrario, los talentos que se queden en el sistema universitario español, lamentablemente, lo tendrán mucho más difícil y probablemente se apagarán, pasando a formar parte de la multitud de jóvenes que acaban realizando trabajos muy inferiores a los que les correspondería por sus completísimos currículums universitarios.

La Paradoja de la Gestión Activa.

A colación de nuestro artículo titulado «Las miserias y trapos sucios de los ETFs y fondos indexados«, donde explicábamos que no es oro todo lo que reluce en la gestión pasiva, tan de moda en estos tiempos, vamos a resumiros y comentaros el interesante estudio llevado a cabo por Alexey Panchekha, CFA, en el blog Enterprising Investor del CFA Institute. En dicho estudio, este especialista e investigador de aplicaciones matemáticas para la gestión del riesgo, que ha trabajado para Goldman Sachs y Bloomberg entre otros, nos explica lo que ha bautizado como la Paradoja del Gestor Activo. Veamos a qué se refiere y qué aplicaciones puede tener conocer los resultados de su estudio para el inversor de a pie.

La pregunta del millón es: ¿La culpa de que en la última década la gestión activa haya perdido terreno respecto a la gestión pasiva es de las altas comisiones que cobran, de la falta de habilidad de los gestores o por alguna otra causa?

Lo que se necesita para responder a esta pregunta con rigor no es una respuesta irreflexiva, especulativa ni apasionada por parte de los fans de unos u otros estilos de gestión. Por ello dicho estudio de basa en hechos sobre las decisiones que toman los gestores activos. Como se suele decir, difícilmente puedes gestionar lo que no puedes medir.

Panchekha ha analizado cómo los gesores activos generan alpha con su selección de empresas. Han llevado a cabo un estudio de varios años cubriendo 114 fondos de inversión norteamericanos pertenecientes a 57 familias de fondos distintas, y han evaluado más de 400.000 periodos de un año de rendimientos (al final de este artículo encontraréis el detalle de la metodología utilizada en el estudio). Combinando todo ello, la muestra del estudio representa 2 billones (trillones americanos) de activos bajo gestión.

La clave es el nivel de convicción de los gestores. Es decir, el nivel de certeza que los gestores tienen en cada subgrupo de empresas que tienen en sus carteras. Para poder determinarlo, el estudio distingue las posiciones sobreponderadas e infraponderadas en lugar de simplemente el volumen absoluto, que podría estar distorsionado por los pesos -de obligado seguimiento- en sus respectivos benchmarks. Por tanto el estudio distingue 3 tipos de acciones en carteras:

Las sobreponderadas o de mayor convicción
Las infraponderadas o de menor convicción
Las neutras

Se identifican los componentes de estas tres categorías midiendo diariamente sus carteras y pesos, rebalanceando cada grupo cada 14 días. Los datos los obtuvo la base de datos Hercules, de Turing Technology Associates. Los resultados, que podemos ver en el gráfico inferior, muestran el ratio de éxito de cada categoría comparado con sus respectivos índices de referencia durante periodos sucesivos de un año y las alphas anuales conseguidas en dichos periodos.

The Impact of High-Conviction Overweights, Gross of Fees

The Impact of High Conviction Overweights, Net of 85 bps Fees

Como se aprecia claramente, las posiciones sobreponderadas o de alta convicción, compuestas por las mejores ideas de los gestores, es la única categoría que realmente genera alpha por encima de los índices. En un 84% de los casos si miramos rendimientos brutos, y en un 74% de ellos si consideramos los rendimientos netos con un promedio de comisiones pagadas de 85 puntos básicos. En comparación, tanto las posiciones infraponderadas (de menor convicción) como las neutras, solo generaron un ratio de éxito del 50% bruto (puro beta), que caería por debajo de ese umbral después de pagar esas mismas comisiones.

Warren Buffett, carta a los accionistas 1966.

Las posiciones sobreponderadas de alta convicción, o sea en las que los gestores confían más y en las que tienen mayor certeza, son las únicas porciones de sus carteras que generan beneficios por encima de sus índices. Ahí está la paradoja, a pesar de que los gestores activos demuestran tener capacidad para superar a los índices al elegir sus acciones preferidas, pierden esa capacidad cuando diseñan el resto de sus carteras en su afán de completarlas, diversificarlas, compensarlas o reducir su «riesgo», confundiendo una vez más riesgo con volatilidad. En algunos casos es falta de valentía, falta de convicción o simplemente muchos de ellos tienen las manos atadas por los ratios vs los índices que deben por folleto seguir de determinada manera. No importa el motivo. Lo que el estudio evidencia es que sólo las acciones sobreponderadas y de alta convicción consiguen superar al Mercado. Cualquier otra asignación de activos va a reducir los beneficios.

Pero la cosa no acaba ahí. Además, según el estudio, el promedio de gestores auto-sabotean sus rendimientos reduciendo sus posiciones de alta convicción hasta un mísero 55% de sus carteras. La correspondiente asignación de activos infraponderados y neutrales de casi la mitad de sus carteras supone pues un lastre de beta insuperable. Para ilustrarlo Panchekha pone un ejemplo deportivo de futbol americano, pero el equivalente aquí sería como si el entrenador del Barça solo alinease a Messi el 55% de los 90 minutos de juego.

Desde luego ese lastre de beta tiene una explicación para los gestores que lo perpetran. Por ejemplo añadir el componente de market-neutral reduce el tracking error del fondo vs su benchmark, cosa sorprendentemente apreciada por el sector y algunos inversores. También reduce las probabilidades de que el rendimiento del fondo quede en evidencia ante la competencia, ávida de sangre para robarse los clientes entre ellos. Pero en cualquier caso, el estudio demuestra que todas estas acciones de «gestión del riesgo» que tanto preocupan a la industria del sector y a los inversores mal asesorados, van indefectiblemente contra rendimientos, y se demuestran actos de cobardía o, en el mejor de los casos, de inseguridad.

El resultado de este cocktail de falta de convicción (calidad de análisis) de los gestores activos, su falta de valentía para diferenciarse del resto de gestores y sus imposiciones normativas/corporativas, les llevan a hacer una gestión del «riesgo» tan -paradójicamente- arriesgada que les hace perder todo lo ganado y más. El siguiente gráfico refleja la cruda realidad, la mayoría de gestores activos no merecen las comisiones que los inversores les pagan para superar al mercado, puesto que casi la mitad de sus carteras no lo consiguen, y los costes hacen el resto. El problema es que la estadística no distingue las carteras diversificadas de las concetradas. Es decir, carteras cuyo 90 o 100% de las acciones son de alta convicción, respecto carteras donde, según la estadística, solo el 55% de las acciones son de alta convicción.

Actively Managed Large-Blend Mutual Funds vs. the S&P 500

Mientras que lo habitual en la industria financiera es culpar a las altas comisiones del pobre rendimiento de la mayoría de fondos de gestión activa, el estudio de Panchekha revela que las comisiones son solamente un causante secundario. O sea, que diluír la única fuente generadora de alpha en las carteras a niveles del 55% tiene un efecto mucho más letal a la hora de comerse sus rendimientos que las comisiones pagadas. Volviendo al símil futbolístico, mientras que los seguidores del Barça están culpando de la mediocre marcha del equipo a las primas desorbitadas que cobra el entrenador (o al estado de los terrenos de juego, o a la climatología, o a las lesiones, o a los árbitros, etc.), deberían más bien señalarlo por dejar a Messi en el banquillo casi la mitad de los partidos sistemáticamente. Panchekha afirma textualmente:

«While it is industry convention to blame these outcomes on higher fees, our research suggests that fees are only a secondary contributor. Diluting the sole source of stock-selection alpha to a minority component of a portfolio has far greater structural impact than higher fees.»

El ya histórico mal comportamiento de la mayoría de los fondos de inversión activa respecto a sus índices ha llevado a los inversores norteamericanos a retirar $1,3 billones (trillones americanos) de dichos fondos para colocarlos en la creciente indústria de fondos de gestión pasiva y ETFs, según datos de Morningstar.

El estudio muestra promedios y muestreos de fondos sin separar gestores de carteras concentradas de las diversificadas. Si separamos el grano de la paja, es decir seleccionamos gestores de carteras reducidas, compuestas en su totalidad por acciones cuya certeza y convicción es muy alta, encontraremos mucha alpha y muy poca merma, a pesar de sus comisiones que, como ya hemos dicho en el artículo anterior, suelen ser bastante elevadas. Los rendimientos NETOS de esos fondos de gestores estrella, con carteras valientemente concentradas y con conocimiento exhaustivo de los negocios en los que invierten, superan de manera clara y sostenida en el tiempo a sus respectivos índices de referencia, importando poco su TER. ¿O acaso a algún accionista de Berkshire Hathaway le importa el sueldo que tenga Buffett o cualquiera de sus directivos actuales? Y si en algún momento la rentabilidad de ese holding disminuye de manera alarmante, los accionistas deberían fijarse más en si sus directivos están comenzando a disminuír la calidad de su holding -por primera vez en décadas- y no en si Buffet o sus sucesores cobran sueldos altos o bajos.

Para los escépticos y demás groupies de los fondos de gestión pasiva y ETFs, el estudio que ha realizado Panchekha debería ser la prueba del algodón: La principal causa de la mediocridad de los gestores activos es su limitada capacidad y/o escasa valentía para concentrar sus carteras al 100% en sus «best ideas» o empresas de alta convicción. Y éste no deja de ser un secreto a voces que siempre han proclamado los mejores gestores value del planeta: Para qué vas a invertir en tu vigésima mejor idea si puedes hacerlo en tu primera, segunda y tercera. La única respuesta es por la escasa convicción, el miedo a equivocarse o las obligaciones corporativas o regulatorias. Las comisiones de gestión elevadas sólo son la puntilla a carteras excesivamente diversificadas y con insuficiente convicción y calidad. ¿Cómo si no se explicaría que los fondos activos con los mejores rendimientos NETOS del planeta (muchos de ellos ya cerrados a nuevos inversores) tengan comisiones sensiblemente superiores a los 85 puntos básicos que de promedio contempla el estudio? Veamos algunos ejemplos de alphas espectaculares en rendimientos NETOS en USD en las últimas décadas, el primero respecto al MSCI China, el segundo vs el RTS ruso y el tercero vs el mismísimo S&P500:

Encontrar fondos que superen la Paradoja del Gestor Activo es clave para el inversor. Pero también para la indústria de fondos activos es clave que cada vez más y más gestores superen el miedo a ser distintos a su competencia, que se superen las limitaciones autoimpuestas en sus prospectus y que dejen de ver la concentración y la volatilidad como un factor de riesgo. El verdadero riesgo que corren la mayoría de gestores activos que solamente se conformen con no ser los peores de su clase es que se acaben extinguiendo. Y su extinción, además de merecida, favorecerá más y más el crecimiento de fondos indexados con carteras que eligen empresas de manera mucho más simple y superficial. Fondos pasivos que actúan como si un comprador de un piso tomase la decisión de ir al notario simplemente teniendo en cuenta algunos ratios superficiales, sin conocer perfectamente el estado de conservación del inmueble, su eficiencia energética, su memoria de calidades o el vecindario, por poner algunos ejemplos. Obviamente es mejor comprar un piso teniendo en cuenta algunos ratios superficiales que simplemente comprar por recomendación de un amigo o aleatoriamente, claro está. Pero esa no es la manera en la que nuestras inversiones van a brillar a largo plazo de manera decuada.

En definitiva, la buena noticia es que los gestores activos en su conjunto crean valor. La negativa es que la inmensa mayoría de ellos lo pierden antes de que llegue a sus inversores. Los inversores tienen pues dos opciones: Informarse suficientemente para poder distinguir los gestores con mayor convicción y concentración en sus carteras; o simplemente culpar de la mediocridad de los resultados de los gestores activos a las comisiones pagadas, y arrojarse en brazos de carteras aún más diversificadas y de menor convicción pero con comisiones low-cost. Para los que elijan seleccionar los fondos activos con mayor convicción en sus carteras es casi imprescindible que amplíen su universo de inversión al 100% de los fondos existentes en el mundo y no se queden con sólo el 10% que se comercializa en España.

A continuación os dejamos los detalles de la metodología del estudio:

Research Design Methodology

This analysis is based on a proprietary database of daily fund positions and portfolio weights constructed and maintained by Turing Technology Associates Inc. The specific funds used in the research dataset include 114 unique US equity mutual funds, from 57 fund families, and represent $1.996 trillion in assets under management (AUM).

Fund Selection Process

The funds selected for use in the research came from the set of mutual funds included within a series of investment portfolios known as Ensemble Active Management (EAM) Portfolios. Turing licenses a series of proprietary technologies to clients to support their creation of such EAM Portfolios. Each EAM Portfolio is typically constructed from a set of 10 to 15 underlying mutual funds with a corresponding industry benchmark. As of early August 2019, Turing had 24 client-designed EAM Portfolios in live production.

All 114 funds used within the study were selected by clients or prospects of Turing related to the design of an EAM Portfolio. Because Turing’s clients selected the underlying funds and corresponding benchmark, the fund selection process maintained independence from the researchers.

Each paired fund and benchmark is a subject of the analysis. Benchmarks included the S&P 500, Russell 1000, Russell 2000, Russell 1000 Value, and Russell 1000 Growth. The time periods used were either January 2014 through July 2019, or January 2016 through July 2019, depending on available data.

Source of Daily Fund Positions

To access daily fund holdings, Turing applied its proprietary fund-replication technology known as the Hercules System. Hercules is a machine learning-based platform processing a multitude of publicly available data, with core concepts behind the approach in use and development for more than a decade. Hercules is not a regression-based approach. Daily estimated positions are generated by the Hercules System, with the out-of-sample portfolios rebalanced every 14 days.

For reference, the Hercules estimated fund holdings and weights for the funds used in this study typically generated a tracking error of less than 1%, and a correlation to the actual fund returns that was greater than 99.7%.

Isolating Manager Conviction

The focus of this research was to analyze the impact of manager conviction in security selection, and thus we embedded two critical design elements into the study. First, securities were categorized and evaluated based on portfolio weights relative to the benchmark. Rather than focus on actual portfolio weights, which are heavily influenced by benchmark weights, the emphasis was placed on a manager’s overweight and underweight decisions and the scale of the over or underweight positions. Second, we divided each fund into multiple, non-overlapping subportfolios determined by the level of Manager Conviction involved, and evaluated their performance separately. Each subportfolio was rebalanced every 14 days and treated as a distinct Model Portfolio. The three subportfolios analyzed were:

High Conviction Overweights: A subportfolio consisting of the largest overweight positions for stocks in the fund. The subportfolio was selected to cumulatively represent 80% of aggregate portfolio overweights relative to the benchmark.

Underweights: A subportfolio consisting of the largest underweight positions for stocks in the fund. The subportfolio was selected to cumulatively represent 80% of aggregate portfolio underweights relative to the benchmark.

Neutral Weights: A subportfolio consisting of overweight securities that are not included in the Overweight subportfolio and underweight positions that are not included in the Underweight subportfolio.

All subportfolios capture distinct choices by a fund manager. The dynamic portfolio weights for each subportfolio are in proportion to the original fund weights, normalized to 100%. Securities outside of the benchmark were excluded as they cannot be properly evaluated in relation to a benchmark. All performance data was calculated both as gross of any fees and after factoring in a hypothetical 85 bps fee. Neither result reflected transaction costs.

The performance data presented represents rolling one-year data (daily step), which was evaluated to capture the percent of rolling periods where each subportfolio was able to outperform the corresponding benchmark (Success Rate), and the average excess (or negative) relative return.

A subportfolio consisting of securities included in the benchmark but not included in the mutual fund (i.e., Zero Weights) was built and analyzed. This fourth subgrouping was not included in the research results because the only way to capture any potential alpha would be through a 100% short portfolio, which is not allowed in a traditional mutual fund. For reference, the Zero Weight portfolio underperformed the benchmark by 78 bps, on average. Unfortunately, even a frictionless short portfolio of Zero Weight securities would not be able to earn the fees of even a standard long-only mutual fund.

The downsides and dirty secrets of ETFs and index funds.

Index funds now account for more than 50% of the US equity fund market. And in Europe and the rest of the world, they are also gaining more and more followers. The main culprits for this are undoubtedly those pulling the strings of actively managed funds, whose mediocre net returns are driving disillusioned investors into the arms of passively managed funds. The reasoning of these disillusioned investors is simple: if we’re going to earn little, at least let’s pay low fees for it. But the fact that the majority of actively managed funds (between 8 and 9 out of 10) are mediocre and fail to outperform their respective indices does not mean that investors should settle for this and stop looking for that minority that outperforms them by a wide margin, as we explained in our article published on the COBAS website a couple of years ago. Here’s an example of the alpha in NET returns achieved by certain star fund managers, outperforming any index fund and with lower volatility:

Obviously, for investors who look beyond the products peddled by banks in Spain, there are gems like the one in the chart above, which outperform ETFs and other index funds by a mile. But what’s more, the comparisons are even more damning if we analyse in depth what is happening in the index fund and ETF industry. Let’s look at some of its shortcomings:

Just as a junk food manufacturer is a far cry from a good chef, those in charge of massive index funds such as those from BlackRock, Vanguard Group o State Street Corp They have nothing in common with good value fund managers. The former are only concerned with filling millions of cardboard boxes with something that looks like food, is cheap and appeals to shoppers. They couldn’t care less whether their customers end up with obesity, high blood pressure or any other health problems. All they care about is selling more and more volume every day at low cost. Similarly, index funds focus exclusively on pouring more and more millions into their portfolios, without caring in the slightest whether what they are buying are good or bad businesses, well or poorly managed, without caring about their fair value, let alone the long-term returns they will offer their shareholders. After all, why should they care, when more and more investors are turning away from expensive restaurants and resigning themselves to satisfying their hunger with cheap junk food?

What many people don’t realise is that these three giants of the index fund and ETF industry are responsible for keeping inefficient managers in the companies in which they invest. On reflection, the reasons may well be down to sheer carelessness, but if we scratch beneath the surface a little, hidden motives emerge, as we shall explain later. The fact is that its size is becoming such that their votes on the boards of directors are decisive to retain or replace management teams. The result is that not only do they invest indiscriminately in both good and bad companies (something inherent in passive or index-based management), but their votes also serve to keep poor managers in their posts. The million-dollar question is what interest these index fund owners could possibly have in retaining and paying out million-pound bonuses to inept managers. As always, the devil is in the detail.

A study carried out by Reuters through the company Proxy Insight (lower graph) shows that in the 300 worst Among companies in the Russell 3000 index where proxy votes were cast, BlackRock voted in favour of management in 931 out of 1,000 cases, Vanguard in 911 out of 1,000, and State Street in 841 out of 1,000. The study concludes that these three giants supported the management of the worst-performing companies only slightly less than that of the other companies in the index, in other words, without caring in the slightest whether or not the management was harming the profits and performance of their companies.

The litmus test is that the percentage of support given by large pension funds to management teams at poorly performing companies is falling significantly. Of course, pension funds do care about returns for their future pensioners.

Some might argue that active fund managers do not usually go against the management in place either, but the reality is that active managers no longer invest in companies whose management is performing poorly or with whom they disagree. In fact, that is the essence of active management: identifying good businesses run by good managers, whilst also taking into account their price relative to their intrinsic value, in the case of value investing (Compare these returns with those of any passive fund). What’s more, even if a mediocre, lazy or ill-informed active manager were to invest in a poor-performing company and, through their proxy vote, support a poor management team, the influence they would have on the vote would be infinitely less significant than that of a massive index fund or ETF.

Consequently, there is a very real risk that mediocre companies with mediocre management will continue to exist indefinitely, due to the proxy votes cast by giant shareholders such as ETFs and index funds. Why would those passive funds care about the performance of the companies in their portfolios if their aim is not to outperform the index but simply to track it? Why would they confront their incompetent managers, replace them or deny them a huge bonus, if their sole incentive is to grow the fund rather than maximise returns for investors?

Another reason – this one more Machiavellian and immoral – for not going against the bad managers of large corporations is that it is those very same executives who are promoting these passive investment funds to their thousands upon thousands of employees. How else can one explain the fact that Vanguard, State Street and BlackRock all voted in favour of doubling the salary of the CEO of the energy company PG&E Corp, just after its shares plummeted following indications that the company was liable for the California wildfires? Or that they approved astronomical bonuses for executives at the cosmetics company Coty Inc – including half a million dollars to pay for their children’s school fees– after the company had been reeling from its reckless acquisition of Procter & Gamble’s beauty division. They have also unanimously vetoed an attempt by the other shareholders to separate the executive powers of the CEO and Chairman of the Board of General Electric Co, following a decade of poor results, etc., etc., etc… Even in the few cases in the Russell 3000 study where shareholders managed to veto executive bonuses, in 601 of those cases BlackRock attempted to award them bonuses through its vote.

Bear in mind that the largest holdings in index funds and ETFs, just like the indices they track, are in very large companies – that is, those with the highest number of employees worldwide. This is a vicious circle, as those executives are, after all, fund managers in return for fund owners voting in favour of their million-pound bonuses at board meetings. A win-win for them, but a lose-lose for investors in ETFs and index funds, and for the economy as a whole.

As it is the investors in these funds themselves who are most affected by the poor quality of the portfolios, it might seem that this circle is finally closing with a certain sense of justice. But we must not underestimate the damage being done to the global economy, because every day the markets are channelling more and more millions into mediocre companies and teams, with no one seeming to care about this inefficient allocation of capital. Furthermore, Western central banks continue with their free-for-all of cheap money, and with these trillion-dollar injections, alongside those from passive investment funds, We are undermining Darwin's theory of evolution. In other words, propping up zombie companies and executives with money created out of thin air and from investors more concerned with saving on fees than with investing their money wisely.

La Era Keynesiana traslada el centro de la inversión mundial a los Mercados Emergentes.

Ya lo dijo Mark Mobius, ex-chairman ejecutivo de Templeton y fundador de Mobius Capital Partners en un artículo del mes de Marzo: Hay que invertir en las bolsas de los aún llamados países emergentes. Y esta vez es el think-tank financiero Gavekal Research quien publica un informe titulado «Wealth transfer to Emerging Markets» que no tiene desperdicio. En él se dice que la era Keynesiana, es decir, de represión financiera, de facilidades cuantitativas (QE) o en definitiva la Era en la que los principales bancos centrales del mundo (FED, BCE, BoJ, etc) reducen el precio del dinero para reactivar el crecimiento anémico de las economías Occidentales del planeta, son chutes de crecimiento económico directamente en las venas de las economías Emergentes.

Cuando el rendimiento del Oro supera al de las principales divisas desarrolladas del planeta, el mundo entra en lo que llaman una Era Keynesiana. Si a ello le añadimos una acción coordinada de los bancos centrales de las economías desarrolladas, las políticas actuales de quantitative easing y tipos por los suelos son la eutanasia del rentista. La cuestión es, ¿quién se beneficia de esta muerte anunciada? Los mercados Emergentes, sin duda. Y comprobaremos esa clara transferencia de dinero desde los mercados desarrollados hacia los emergentes en este gráfico núm 1:

El eje inferior determina el crecimiento del PIB per capita (a precio de USD constante) desde el fin del patrón oro. Vemos como, tanto en épocas Keynesianas como en épocas Wicksellianas (por Knut Wicksell, que abogaba por unos tipos siguendo la corriente del crecimiento económico y no como herramienta correctora), el crecimiento es el mismo si tomamos el mundo en su conjunto. Pero fijaos que si distinguimos los países emergentes de los desarrollados, la cosa cambia radicalmente. Ahí el crecimiento de las economías emergentes se ve claramente favorecido por las épocas Keynesianas, justo al contrario de lo que sucede con los países desarrollados. Y también al contrario de lo que en principio se pretende con la política Keynesiana.

¿Por qué sucede esto, cuando intuitivamente parecería que las políticas monetarias laxas en divisas occidentales debieran favorecer el resurgir precisamente de las economías de los países desarrollados y no las de los emergentes? La primera razón es que los emergentes, muchos de ellos exportadores de materias primas, aumentan sus beneficios debido al aumento de precios de sus exportaciones. Y es que los activos reales (commodities) tienden a encarecerse cuando las divisas occidentales se deprecian respecto al resto de activos y divisas, cosa que ocurre en las Eras Keynesianas de bajos tipos.

Lo vemos muy claro en el gráfico núm. 2, donde, por el contrario, las épocas Wicksellianas son poco menos que la ruina de los exportadores de materias primas.

La segunda razón es que la deuda externa en USD de las empresas de países emergentes se abarata con los tipos bajos de las eras Keynesianas, lo cual genera beneficios adicionales a dichas empresas. Muy especialmente de aquellas que pertenecen a países con economías saneadas, poco endeudadas y muy productivas, donde sus divisas se mantienen estables o incluso se aprecian.

El gráfico núm. 3 mide el exceso que pagan los depósitos en moneda local respecto al USD. Dicho de otra manera, el coste de financiación que esas empresas ahorran respecto al coste que tendrían en divisa local durante las eras Keynesianas. Concretamente el exceso de coste de moneda local está entre el 4% y el 12% anual en los países BRICS. El ahorro es muy significativo para los mercados emergentes, tanto como lo es a la inversa para los desarrollados, que a su vez se beneficiaran de esa era Keynesiana al colocar su capital en economías emergentes asumiendo el riesgo divisa local. O sea, que el capital vuela hacia las economías Emergentes por diversas vías en estos tiempos de dinero gratis en Occidente. Entre otras razones porque es un dinero gratis que en el propio Occidente no hay donde colocarlo para que rinda lo más mínimo.

Además, TrackMacro confirma que a fecha de este mes de Septiembre 2019, el ranking de riesgos de poseer acciones de empresas en los diversas economías mundiales es el que podemos ver en el gráfico núm 4. Es decir, que los países exportadores de materias primas empiezan a hacer su Agosto desde el pasado Agosto, liderando el gráfico en los últimos 5 meses. Notad que en el grupo de «Developing Asia» se excluyen los asiáticos exportadores de materias primas, que se computan como «Commodity exporters». Por tanto, obviamente no todos los países emergentes gozan de estos flujos de dinero, del mismo modo que tampoco podemos considerar al mismo nivel la economía alemana y la griega, a pesar de que ambas sean «desarrolladas europeas».

Para acabar de reafirmar la conveniencia de invertir en ciertos Mercados Emergentes, TrackMacro también publica que de acuerdo a los indicadores macro fundamentales, los principales exportadores de materias primas como Rusia o Brasil disfrutan de una atractiva relación valor/riesgo. Si a todo ello añadimos las medidas en la buena dirección que están tomando distintos gobiernos emergentes, como por ejemplo la bajada de impuestos de sociedades en India, que les permite su bajo endeudamiento y una demografía productiva, la recomendación es aún más potente. Hay que invertir en economías de paises emergentes con la naturalidad, la confianza y las mejores perspectivas, como antaño tenían los mercados desarrollados. Pero eso sí, haciéndolo a través de los mejores gestores de fondos de inversión locales, que conocen perfectamente no solo las empresas de su país sino también sus intríngulis legislativos, contables, fiscales e incluso culturales.

Invertir con el viento a favor de los mercados Emergentes y evitar los vientos en contra (endeudamiento, demográfico, recesión, escasa productividad, etc.) va a ser la clave en los próximos años. Para los tenedores de las típicas carteras de acciones españolas ahí va un dato demoledor: Hoy el Ibex35 está al mismo nivel que en 1998, la bolsa alemana se ha multiplicado en ese mismo periodo x2,5, la de USA x2,7 y la de India x10,5. Pero lo peor para unos y lo mejor para otros está por llegar.

Conclusión: Las políticas Keynesianas en las principales economías desarrolladas deberían en teoría luchar contra las inercias deflacionarias, estimular el crecimiento local y fortalecer a las compañías occidentales ante los competidores de países emergentes. Pero el resultado de dicha política de facilidad cuantitativa y tipos bajo cero puede ser exactamente el contrario. La depreciación de las divisas occidentales conduce a una inyección de ingentes masas de dinero hacia las economías emergentes (que por otra parte son de por sí imanes para la inversión natural, aún sin medidas desesperadas en Occidente). Los inversores hoy en día sufren una situación asimétrica, donde sus divisas principales han dejado de ser valores refugio a causa de los tipos bajos. Esta Era de los Bancos Centrales favorece a priori el oro, los activos reales y las acciones de empresas emergentes, y lo hace en detrimento de las economías desarrolladas, la deuda soberana y las acciones de empresas occidentales.

Como bien decía Mark Mobius en el artículo citado, a finales de los años ochenta las economías emergentes tan sólo pesaban un 5% del Mercado global, pero ahora suponen más de un 40%, y subiendo rápidamente. En esos años los inversores no podían invertir en más de media docena de bolsas, y sin embargo ahora tenemos más de 70 mercados abiertos a la creciente inversión extranjera, perfectamente dotados de los medios técnicos más punteros y supervisados por reguladores de alto nivel profesional. Esto permite en la actualidad una enorme diversificación y seguridad, y nos marca el camino a seguir: Es el momento de invertir en determinadas economías emerging - or already emerging donde se está produciendo una tremenda recuperación y crecimiento económico.Además, la guerra comercial USA-China no es más que oportunidad de oro para hacerlo a precios moderados. Y quien siga vendiendo el miedo a invertir en los mercados emergentes está desinformado y obsoleto, o bien obedece órdenes de sus superiores para vender un pescado deflacionario, recesivo y que huele muy mal ya desde que los bancos centrales abrieron el grifo para mantener en pie economías y empresas zombies.

Adiós al Patrón Solvencia. El dinero infinito es el nuevo Patrón.

Aunque la mayoría de inversores no han conocido más allá del Patrón Solvencia, no hay que olvidar que hace ya 48 años que las autoridades monetarias norteamericanas decidieron abandonar el Patrón Oro, es decir el anclaje del valor del dólar al del metal precioso. El patrón de anclaje del dinero a una commodity que le confiriese un valor intrínseco fue una práctixa muy extendida no solo en la antigüedad sino también durante el s. XIX y XX, y por tanto su supresión a principios de los años setenta generó una sensación de vértigo muy importante para los ahorradores norteamericanos acostumbrados a dormir tranquilos pensando que podían cambiar sus papelitos bancarios por una proporción de oro. Las dificultades por parte de los emisores para mantener la contrapartida de valor a sus monedas fue in crescendo, de modo que cada vez la proporción de valor intrínseco del dinero emitido iba siendo menor, con lo cual el dinero en circulación podía aumentar más allá del límite establecido originalmente por la propia riqueza material (commodity).

A partir de ese momento se empezó a sustituír de manera paulatina y más o menos sutil el valor intrínseco por la confianza (fiat) en el emisor. De hecho en algunos países como China, en una parte de lo que ahora es Canadá u otros países y reinos europeos se inició ese camino de no retorno hacia el fiat money hace siglos. El nuevo Patrón Fiat Money se impuso rápidamente en occidente durante el s. XX, empujados por las apreturas económicas fruto de las guerras mundiales, arrojando el valor del dinero ya totalmente en brazos de la confianza (fiat) en los Estados, que estuvieron lógicamente encantados de las posibilidades de manipulación política del dinero que eso les proporcionaba. Con el finiquito del acuerdo de Bretton Woods en 1971, los EE.UU. enterraron definitivamente el valor intrínseco de su divisa, y el fiat money posó a ser el patrón global, por si a alguno le quedaba aún alguna duda. A partir de ahí, obviamente, unos Estados lo hicieron mejor que otros, léase por ejemplo EE.UU vs Argentina, Venezuela o las repúblicas bananeras y sus hiperinflaciones. Pero incluso para los mejores de la clase, la confianza de la mayoría de los ahorradores en sus respectivos Estados no ha podido evitar perder poder adquisitivo a lo largo de los años.

El Patrón Fiat Money vino para quedarse, evidentemente, y jamás volveremos a ver nuestro dinero anclado a ningún activo real. Es demasiado goloso para los Estados disponer de la creación de dinero electrónico (otrora impreso) infinito. Pero a pesar de esa posibilidad inacabable, de la que han venido abusando las repúblicas bananeras hiperinflacionistas, dicho Patrón Fiat se autolimitaba con un criterio que ha sido clave durante los casi 50 años: La Solvencia. De ese modo, anclando la posibilidad de crear dinero infinito a los límites de la solvencia para repagar deudas, el Fiat Money ha venido siendo en realidad la sustitución del Patrón Oro por el Patrón Solvencia. Es decir, que la confianza en el Estado tenía un límite, que no era otro que la posibilidad material de repagar sus deudas y de cuadrar sus cuentas entre gasto público y cobro de impuestos a la población sin que la inflación se dispare. Por eso, durante décadas, han habido países cuya moneda se depreciaba respecto a otras por su mala gestión, que obligaba a esos Estados a cubrir sus desmanes presupuestarios con dinero nuevo o deuda pública, que a su vez generaba inflación. Una deuda pública que el dinero privado de inversores nacionales y extranjeros, debían considerar atractiva para financiarla. Inversores que por tanto exigían a cambio un interés acorde con el riesgo de que ese Estado no pudiese pagar sus deudas sin imprimir billetes, y por tanto que la inflación devorase su poder aquisitivo. Es decir, unos tipos de interés que a su vez ponían precio a esa divisa emitida por cada Estado, en función de su capacidad de cuadrar sus cuentas y su inflación, es decir su Solvencia.

Por tanto teníamos un sistema cuya insolvencia lo autorregulaba, ya que quien caía en una espiral imparable de deuda a tipos crecientes e inflación galopante tardaba pocos años en hacer un default, llevando su economía y la de sus conciudadanos mal asesorados a la ruina. Pero como los políticos nunca han sabido pilotar la economía, el abuso del endeudamiento, incluso en los países que mantenían el control de su inflación, empezó a burbujear. Hasta que llegó la crisis de deuda del 2007 y el consiguiente crash de 2008. Ahí el abuso de la deuda estaba tan generalizado y la insolvencia era tan elevada, que el riesgo de default de los insolventes era sistémico, empezando por todo el sistema bancario occidental. Solución: La famosa frase de Draghi «whatever it takes«. Es decir, los bancos centrales generaremos el dinero que haga falta para convertir a los insolventes en solventes y salvar así el sistema. Porque con liquidez infinita el insolvente jamás quiebra, simplemente amplía y renueva sus deudas hasta el infinito y más allá, permitiendo a los acreedores que no tengan que provisionar más pérdidas incobrables que las que sus balances puedan soportar. Algo así como la avestruz que esconde su cabeza bajo tierra.

El nuevo patrón es por lo tanto el del dinero fiat, pero desde hace ya una década además es infinito por decisión de los bancos centrales más poderosos del planeta. Es decir, que se crea y se creará el dinero que sea necesario para mantener a flote bancos, grandes empresas sistémicas y a los propios Estados como ocurre en el sur de la Eurozona, añadiendo ceros a su deuda y con tipos de interés bajo cero (ya hablamos de ello hace 6 años en financial repression). Algunos de los inconvenientes obvios son que estamos permitiendo la supervivencia de empresas zombies, ineficientes y endeudadas hasta las cejas, que repagan sus vencimientos con nuevo dinero creado por los bancos centrales a cambio de su papel mojado. Otro inconveniente letal es que los tipos bajo cero no solo mantienen a flote a los insolventes públicos y privados sino que incentivan aún más el endeudamiento privado. Por todo ellos la solvencia ya no es un ratio a tener en cuenta. También será un caos el hecho de que todo esos tipos ultra-bajos se llevan por delante a todo aquel que haya hecho de la renta su modus vivendi u operandi, es decir rentistas particulares, fondos de pensiones, aseguradoras, fondos soberanos y demás dinero que quiera evitar la volatilidad de las bolsas. Hasta hoy llevamos only una década de tipos cero, pero el daño que van a hacer a medio y largo plazo las facilidades cuantitativas son letales para el mantenimiento de sistemas de pensiones de capitalización (tanto como el lo es para los sistemas de pensiones de reparto el vejecimiento de la población que estamos también sufriendo).

No obstante, lo más curioso de la situación actual es que puede ser sorprendentemente sostenible, ya que tiene ventajas como por ejemplo el hecho de que podemos chutar la lata de las quiebras masivas durante décadas, quian sabe si incluso generaciones. Tan solo debemos acostumbrarnos (ya lo estamos haciendo) a que las deudas por ejemplo soberanas superen ampliamente el 100% o incluso el 200% del PIB. Al fin y al cabo qué importa el porcentaje de deuda si la solvencia es un problema que los bancos centrales han dejado atrás con su nuevo Patrón de Dinero Infinito. Así, vemos como los Estados se mantienen solventes a ellos mismos y a sus bancos a base de fabricar dinero sin que su circulación sea significativa, puesto que la inmensa mayoría de esos flujos no salen del circuito de deuda perpetrado entre bancos centrales, bancos privados y empresas estatales y para estatales o sistémicas. En una palabra, estamos viviendo en el paraíso del «too big to fail». En el camino de este nuevo patrón de liquidez infinita se pueden reducir los efectos del temido austericidio, defendido por los halcones alemanes, puesto que se fomentan ineficientes y anémicos crecimientos económicos a la vez que se mantiene una inflación en mínimos y se ahuyenta también la temida deflación. Pero los beneficios miopes no acaban ahí, en este entorno vicioso los políticos puden renovar sus legislaturas sin tener que tomar decisiones valientes ni pensar más allá de una o dos legislaturas, que es su horizonte intelectual habitual.

¿Cuáles son pues los riesgos de esta liquidez infinita? Pues además de suponer el caldo de cultivo perfecto para la asignación ineficiente de un dinero cuyo precio es próximo a cero, la hiperinflación sería otro factor que podría acabar haciendo que este nuevo patrón estallase por los aires. Pero como vimos hace 10 años en «La ilusión de la riqueza y la Teoría Cuantitativa«, el aumento de masa monetaria sin velocidad de circulación no es suficiente para generar aumento de precios. Y el grifo de la velocidad a la que el dinero fluye por las venas de la población, o sea de la llamada economía real, lo dominan absolutamente bancos centrales, gobiernos y bancos privados.

Por tanto nos adentramos en una profunda era donde el Patrón Solvencia ha quedado obsoleto, y donde la liquidez infinita va a mantener a flote empresas, bancos, Estados y gobiernos zombies, dándoles además un aspecto de normalidad al que nos estamos ya acostumbrando escandalosamente. Olvidémonos pues de la escasa volatilidad y la cómoda vida del rentista de antaño, de la selección natural de los insolventes e ineficientes y de un precio del dinero razonable.

El Dinero Infinito es el Nuevo Patrón, y hay que aprender a sobrevivir financieramente en esta nueva era que ha venido para quedarse durante varias décadas (ya llevamos una). Fijaos si no la que se ha liado en cuanto se ha pretendido cerrar el grifo en 2018 (gráfico del encabezado del artículo). Como consecuencia del terremoto en los mercados, los bancos centrales han comenzado la marcha atrás para volver a abrirlo en 2019 y 2020. Los rentistas y los inversores conservadores (sic) que aún creen que pueden superar la inflación con escasa volatilidad, están siendo engañados por sus asesores financieros y/o banqueros. En este entorno de tipos cero y sobreendeudamiento, ni hoy ni en los próximos muchos años va a ser posible generar rentas sólidas y sostenibles que superen la inflación sin asumir un enorme riesgo. Y ese riesgo no es otro que prestar nuestro dinero a emisores de deuda y productos estructurados, garantizados y demás ingeniería bancaria, que materialmente son zombies que sólo el dinero infinito mantiene en pie.

La pregunta del millón es si podemos arrojar los ahorros de los más conservadores a los brazos de productos bancarios virtualmente zombies confiando en que el patrón de dinero infinito ha venido para quedarse. La respuesta es que muchos lo vienen haciendo desde hace una década y les ha funcionado relativamente bien (aunque difícilmente han superado la inflación real), puesto que ningún depósito, producto garantizado ni cartera de renta fija ha saltado por los aires bajo la batuta de Draghi, Yellen o Bernanke. Pero que políticamente se haya decidido mantener a flota la insolvencia no convierte en solventes esas inversiones. Por tanto, salvo contadísimas excepciones de activos alternativos generadores de rentas, como life settlements o cierto mercado hipotecario norteamericano, cuya volatilidad es moderada pero de liquidez trimestral y acceso selectivo, los inversores más conservadores harían bien en aceptar la volatilidad de las bolsas de países cuyas economías aún crecen y crecerán durante al menos una década. Y para invertir en esos activos y mercados crecientes deben buscar los mejores fondos del planeta, sin las enormes limitaciones que suponen los importes mínimos o las regulaciones de comercialización en España.

En este patrón de dinero infinito que vino para quedarse, como rezaba el famoso culebrón podría decirse que sin volatilidad no hay paraíso.

The China-US trade war as an investment opportunity.

We’re going to summarise the study carried out by three renowned researchers and professors from Princeton and Columbia who are affiliated with the research team at the Federal Reserve Bank of New York, Mary Amiti, Stephen Redding and David Weinstein. In this study, they highlight the unsustainable costs that Trump’s tariff hikes would impose on the average American household if they were to be prolonged. For this reason, the likelihood of these tariffs bringing down the two most powerful economies on the planet is virtually nil. And they should be viewed as mutual posturing between a headless chicken and one with a head, which presents us with a very good opportunity to position ourselves in the stock markets (particularly Asian ones, as Mark Mobius also suggests in this article). Let’s look at the figures:

The current tariffs imposed on Chinese goods stand at 10%, and were recently increased to 25%, albeit with a 90-day moratorium to allow room for negotiation (an old tactic). To determine the impact of that additional 15% in tariffs, which Trump is threatening to impose if no agreement is reached before the end of that period, the calculation is based on the preliminary study on the impact of the current 10% taxes applied in 2018. It concludes that the impact amounts to an annual cost of $414 per family, comprising the extra expenditure that average families will have to incur to pay the additional taxes, and what they call loss of efficiency o deadweight. It is worth remembering here that a huge proportion of goods come from China, and that the rest contain Chinese components and/or are manufactured using Chinese processes; therefore, a temporary blockade by Xi Jinping would lead to an unimaginable global collapse. In short, the Chinese have the trade ‘nuclear button’ and the Americans do not. But let’s get back to the figures.

The extent of these costs depends on how customs tariffs affect the mark-ups importers add to their products, as well as on the demand for goods imported from China. Various studies, including the one mentioned, have concluded that the tariff increases imposed by the US imposed in 2018 have directly led to higher import prices, meaning that Chinese exporters did not reduce their prices at all to offset the increase in the final price for their US customers. The ratio of the increase in the final price to that of the customs duty was therefore practically 1 to 1. What that initial imposition of 10% on Chinese products did produce was, logically, a 43% drop in demand for Chinese imports, as the first logical move for importers is to postpone purchases and subsequently seek alternative suppliers and routes.

US buyers of Chinese goods now pay an additional 10% tariff on top of the usual base price; in other words, an item that used to cost a US consumer or importer $140 now costs $150. This adds $10 to their individual cost but not the US economy as a whole, as the government collects that additional $10 in the form of tax. The government, in turn, should – or could potentially – reinvest that same $10 and use it for the benefit of its citizens (including those who do not buy or import Chinese products).

It is worth noting here that demand naturally shifts between those who continue to buy more expensive Chinese products and those who switch to less expensive alternatives. Consequently, some importers or consumers will reorganise their trade arrangements or purchasing preferences, so that they buy substitute goods at a price lower than the $110 that Chinese products currently cost them. For example, a Vietnamese or Malaysian substitute item costing $105. In this case, the importer’s/buyer’s cost has increased by only $5, rather than the 10$ it would cost to continue buying the Chinese product. But beware, in this case The US economy as a whole also loses out, as there is no return on those $5 in the form of taxes that can be redistributed to the population. Furthermore, it has been amply demonstrated that importers will end up importing substitute products at a price only slightly below that of the Chinese product. In other words, imports will be at $108 or $109 and not at $101 or $105, as the comparison prior to the purchasing decision will be based on the current price of the Chinese product, i.e. $110. This principle will also hold true because suppliers will use the Chinese price of $110 as a benchmark to set their prices for the North American market. This increase in production chain costs, caused by the rise in import tariffs, is known as loss of efficiency or dead weight.

Economic theory tells us that this deadweight tends to rise more than proportionally as tariffs increase, as importers and consumers are forced to accept ever higher prices when taxes rise. Furthermore, very high customs tariffs lead to a fall in tax revenue, as buyers stop importing products from a country affected by those tariffs/sanctions and seek other suppliers/items from other countries, which are cheaper in terms of final price but less efficient. Let us consider that, up until that point, their suppliers and goods were Chinese because they had chosen that option as the most efficient of all the options that importers and consumers had considered. Therefore, these second and third options, beyond $100, which they are now forced to trade in, are by definition less efficient (worse value for money, worse logistics efficiency, poorer build quality, poorer after-sales service, worse marketing, worse packaging, poorer reliability, worse returns policy, repairs, etc.) than the Chinese products they had been buying at $100.

We can see how these two variables play out by comparing the estimated costs of the 2018 tariffs with the increase recently announced by Trump of an additional $200 billion on Chinese goods. As can be seen in the table below, in November 2018, with the 10% of current tariffs already in place, US importers were paying $3 billion a month in additional duties and suffering an additional $1.4 billion in efficiency losses or deadweight losses.

The total cost to US importers was therefore 1.44 billion per month. If we annualise these figures, we arrive at 52.8 billion, or 414 per household per year. Of this cost, $282 per household corresponds to money that goes into the US government’s coffers, and is therefore relatively recoverable by US society as a whole. However, efficiency losses or deadweight losses amount to $132 per household per year, and represent the net loss to the US economy beyond additional tax payments.

Based on these figures, we can calculate the cost of the additional tariff increase announced by Trump for the coming quarter, rising from the current 10% to 25%. The table shows how tax revenue for the government will fall from $282 to $211 per household per year, as the tax increase on Chinese products will be so costly that American consumers will begin to buy substitute goods that are not subject to these tariffs, such as products from Vietnam or other emerging countries, as we mentioned earlier. Let us remember that these second and third imported options are less efficient (more expensive than the cost of the Chinese product before the tariffs), and furthermore, the government no longer collects those taxes. Some of you may argue that the American consumer/importer can substitute Chinese products with other local American ones and thus avoid the loss of efficiency or deadweight. But the reality demonstrated by the studies The reality of the situation is that it is other emerging economies that are coming out on top, as products from developed countries such as the US have much higher production costs. And not only are their costs much higher, but they also have very limited production capacity (adapted to current demand and market share), which would take years and years to meet demand, even if they were to achieve the unachievable, namely the value-for-money efficiency of emerging countries. Furthermore, the deadweight loss from reduced efficiency increases whether consumers switch to more expensive foreign goods or to more expensive domestic ones.

As a result of this change, which importers and consumers are currently facing and will continue to face for the time being (until Trump blows his top or the lobbies force him to back down, as we will explain below), it is estimated that an increase in efficiency losses per household from 1Q132 to 1Q620 on an annual basis, bringing the total burden to be borne by the average American family up to $831 per year, if the threat of additional customs duties under Section 15% is carried out. Consequently, this increase in tariffs on Chinese imports will lead to enormous economic distortions in American society, as well as a substantial reduction in government revenue. But it is not only ordinary citizens who will be seriously affected. Just imagine the losses that giant American tech (and non-tech) companies could suffer as a result of the trade war and software boycotts targeting giants such as Huawei. Remember that Jinping has absolute control over a market of more than 1.3 billion potential consumers, and an enormous and growing influence over the rest of the Asian and African countries. All of this is already generating tit-for-tat retaliation that is causing, and will continue to cause, endless collateral damage which, no doubt, Trump and his team of ultra-nationalist Republicans have never calculated.

The million-dollar question is: what will major corporations such as Google, Amazon, Microsoft, Apple, etc. do in the face of Chinese reprisals which, although more discreet, will be just as brutal—if not more so—than those of the US administration that have been trumpeted by the Western media? Well, obviously, Faced with imminent losses running into tens of billions, they will prefer to spend billions on lobbying that will force Trump to reverse the situation. And billions, without a doubt, will enable the lobbies, in a perfectly legal manner, to exert pressure that is absolutely unbearable for the Trump administration. Let us not forget that in the US, Congress, with a qualified majority, can force the president and his government to do whatever it wants. Put another way, they can prohibit the Trump administration from imposing any kind of tariff or sanction on Chinese products with 290 out of 435 members of Congress. Currently, the Democratic majority in Congress stands at 54.1 per cent, so they would only need to «convince» 12.61 per cent of Republican members of Congress, some of whom will come round of their own accord as soon as the tariffs start to seriously hit their voters’ pockets.

Ultimately, the trade war between the US and China is so damaging – particularly to the US economy – that it has an expiry date. And Trump knows it. In this game of chicken, whoever has a Congress that keeps them in check, whoever depends on votes and corporate lobbies – in short, whoever lives in a democracy – knows they have lost the game. The winner can be none other than China, whose president implements plans spanning decades without caring about the opinion of voters (sic) or his corporations, which are at the service of the government and, of course, without any lobbying. Neither Trump nor anyone else in the US democracy will ever be able to politically or commercially subdue the Chinese dictatorship and its planned economy. Therefore, although Trump will need to bring his adventure to a dignified close, selling it to the Western media with headlines such as «we have secured the best trade deal in history, blah, blah…», the trade war cannot last more than a few quarters. The big US corporations will not allow it, via lobbies and a qualified majority in Congress. Even this «trade war» may effectively be defused whilst people are still publicly talking about it, due to Trump’s electoral political interests. But the reality can be no other than that of not causing significant or irreversible damage to the US corporate giants, since they have more than enough money to convince enough members of Congress, who in turn will force the US government to back down, even if this is not publicly acknowledged and the perception of a trade conflict continues to be fuelled. After all, Every US president has needed and provoked a war of some sort – one that is low-intensity in reality but generates a media frenzy, during their terms in office, for electoral gain. Trump has opted for a trade war, which will also attract intense media attention but is bound to be of low economic intensity.

For all these reasons, investors would do well to take advantage of the media skirmishes that trigger price falls to position themselves appropriately. In other words, they should go shopping for emerging companies whose figures will continue to grow beyond this fleeting, politically motivated trade war. For all the reasons set out in this article, The gloomier the outlook for the Asian markets becomes in the coming months, the closer their recovery will be. A golden opportunity to buy businesses, with the economic and demographic winds in their favour, at very attractive valuations. Remember that Volatility is a good investor’s friend and the enemy of bankers and other fearmongers, which strive to keep their customers trapped in schemes where the meagre returns are barely enough to cover the fees that are skimmed off along the way.

We simply need to be aware that the more heated the trade war appears in the media, the more we should invest in the best emerging-market-focused funds on the planet. Comparisons of the ‘fear funds’ peddled by the banks, with the best institutional fund managers on international stock markets are a pain. Volatility always goes hand in hand with double-digit annual returns over the medium and long term. And the best news is that There are funds of funds that provide access to these institutional funds, as we explained earlier in «Funds that make inaccessible funds accessible.»

The Chinese are well aware of the significance of the crisis Trump is creating with his trade war. It is no coincidence that there they define the word «crisis» as a synonym for «opportunity». And any self-respecting Western investor would do well to be less influenced by the Western media and more by the value criteria of the world’s best fund managers. This time is no different.

Warren Buffett, concepts to brand the investor. Chapter 3: Letter to shareholders 2018 from BRK.

News, Strategy, Reflection
04/24/2019

After the Chapter 1: Indebtedness and the Chapter 2: Investment, let’s move on to Chapter 3: Berkshire Hathaway’s 2018 Letter to Shareholders. Here we’ll summarise some of the quotes and phrases with which Warren Buffett and Charlie Munger delighted shareholders this year. You can read the full letter, translated courtesy of our friends at the website Value School.

Regarding the share buyback (treasury shares) currently being carried out by their company, Buffett and Munger had the following to say:

For shareholders who stay on (those who do not sell their shares), the advantage is clear: if the market values the stake of a departing partner at, say, 90 pence on the pound, the remaining shareholders see an increase in intrinsic value per share with every buyback by the company. Obviously, buybacks must be price-dependent: blindly buying an overvalued share destroys value, something many CEOs overlook.

When a company says it is considering share buybacks, it is vital that all shareholders receive the information they need to make an informed assessment of the intrinsic value. Providing that information is what Charlie and I aim to do in this report. We do not want a shareholder to sell shares to the company because they have been misled or inadequately informed.

And on the subject of taxation and its decisive influence on the valuation of their holding company, the masters of value investing made some comments that are well worth noting:

Let’s start with an economic reality: whether we like it or not, the US government «owns» a share of Berkshire’s profits, the size of which is determined by Congress. In fact, the US Treasury holds a special class of our shares (something like an AA class), which receives large «dividends» (or taxes) from Berkshire. In 2017, as in many previous years, the corporate tax rate was 35%, which meant that the Treasury was very happy with its AA shares. In fact, the Treasury’s «shares», which paid no «dividend» when we took control in 1965, have become a position that provides billions of dollars annually to the federal government.

Last year, however, the 40% on the government’s «holding» (14/35) was refunded to Berkshire when the corporation tax rate was reduced to 21%. Consequently, our «A» and «B» shareholders saw a significant increase in the profit attributable to their shares.

This development substantially increased the intrinsic value of the Berkshire shares that you and I hold. Furthermore, it also increased the intrinsic value of almost all the shares held by Berkshire.

The tax benefits derived from our large utilities business were passed on to customers. Meanwhile, the tax rate applicable to the substantial dividends we receive from domestic businesses remained virtually unchanged, at around 13.1%. (This lower rate has long been logical because its subsidiaries already pay tax on the profit they subsequently distribute to the parent company.) Overall, the new laws have made the companies and shares we own considerably more valuable.

Nevertheless, his gratitude towards the US is absolute, for without the dynamism and growth of its economy, he could never have amassed such a fortune. Whilst the Germans predicted the success of their troops during the war, the Americans were confident that their children and heirs would inherit a better world. The education of subsequent generations has been one of the keys to the US’s success in leading the global economy over the last century (remember what the economist Gay de Liébana on the merits of sending our children to study at American universities and the affordable costs that can be found with the right advice).

Speaking of the accounting tricks that some executives routinely employ, Buffett said:

Over the years, Charlie and I have seen all manner of corporate malpractice—both accounting and operational—driven by management’s desire to meet Wall Street’s expectations. What starts as an «innocent» lie to avoid disappointing analysts (such as «padding» sales at the end of the quarter, turning a blind eye to insurance losses or withdrawing profits from our «slush fund») can actually be the first step towards outright fraud. The CEO’s intention may be to fiddle the accounts «just this once», but it is rare for it to be just once. And if it is acceptable for the boss to cut corners, it is easy for his subordinates to adopt similar behaviour.

On the need for BRK to have financial clout and the risks faced by companies seeking financing, Buffett and Munger came out with the following gem:

The Russian roulette equation (you usually win, sometimes you die) might make financial sense for someone who benefits from a company’s good news but doesn’t suffer from the bad. This strategy would be madness for Berkshire; sensible people do not risk what they have and need for what they do not have and do not need.

Buffett acknowledged that his fortune has been built almost exclusively on the growth and economic leadership of the US. However, he also noted that the world’s economic centre of gravity is shifting towards certain emerging economies, as in the coming years growth, coupled with the maturity of these markets, will no longer be the exclusive preserve of the US economy (it is worth noting here the investment guidelines Mark Mobius gave us a few weeks ago):

There are also other countries around the world with bright futures. We should be pleased about this: we Americans will be more prosperous and safer if all nations prosper. At Berkshire, we look forward to investing large sums of money abroad.

To round things off, here’s a medley of quotes and jokes taken from the letter to shareholders:

Abraham Lincoln once posed the question: «If you call a dog’s tail a leg, how many legs does it have?» And then he answered his own question: «Four, because calling a tail a leg doesn’t make it one.» Lincoln would have been misunderstood on Wall Street (there they would have argued over whether the dog has one or five).
Even at the ages of 88 and 95 (I’m the younger one), that hope (of making a purchase) is what makes my heart and Charlie’s race. (Just writing about the possibility of a big purchase has set my pulse racing.).
My plan to buy more shares is not a prediction of how the market will perform. Charlie and I have no idea how shares will perform next week or next year. We have never been interested in making that sort of prediction. Our focus, rather, is on calculating whether a stake in a good business is worth more than the market price suggests.
Forget it: it would be foolish to sell any of our wonderful companies, even if the sale were tax-free. Good companies are extremely hard to come by. Selling a business that you’re lucky enough to own makes no sense at all.
As things stand, Charlie and I have no interest in joining that group (people who are divesting). Perhaps we’ll become spendthrifts when we reach old age.
However, some investors may disagree with our valuation, whilst others may have found investments they consider more attractive than Berkshire shares. Some of those in the latter group will be right: there are undoubtedly many shares that will deliver returns far higher than ours.
A major disaster will strike that will make Hurricanes Katrina and Michael look like a joke – perhaps tomorrow, or perhaps decades from now. «The big mistake» could stem from a traditional source, such as a hurricane or an earthquake, or it could be a complete surprise involving, say, a cyberattack with disastrous consequences that insurers do not currently anticipate. When such a catastrophe strikes, we will bear our share of the losses, and they will be huge, absolutely huge. However, unlike many other insurers, we will be looking to acquire businesses the very next day.
In late 1995, after Tony had revitalised GEICO, Berkshire made an offer to buy the remaining 50% of the company for $2.3 billion, roughly 50 times what we paid for the first half (and people say I’m a tightwad!).
Christopher Wren, the architect of St Paul’s Cathedral, is buried inside this London church. On his tomb are the following words (translated from Latin): «If you seek my monument, look around you». Sceptics regarding the US economy would do well to heed this message.
For 54 years, Charlie and I have loved our jobs. Every day, we do what we find interesting, working with people we like and trust. And now our new management structure has made our lives even more enjoyable.
With everything in place—that is, with Ajit and Greg at the helm of operations, a strong business portfolio, a cash flow as robust as Niagara Falls, a team of talented managers and a strong corporate culture, your company is well-positioned for whatever the future may hold.
Berkshire paid $47 million for half of GEICO, roughly the same as what a luxury flat in New York would cost today.

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Category: Estrategia

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