Reflexion - Cluster Family Office

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

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

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

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

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

The side effects of Central Banks are already here.

It was to be expected that central bank intervention would not be innocuous. We warned a little more than a year ago and its effects are already blowing up in some people's faces. If to this massive intervention never seen before we add a couple of other ingredients (Madonna, Madonna, just a couple...) such as OPEC's plot to push down the price of oil, the conflict in Ukraine or the radicalisation of the alleged Islamic State in the Middle East (which affects even Paris itself), the amplification of the side effects of central bank intervention can and will be uncontrollable.

Today we are already witnessing brutal price movements, which do not correspond at all to a healthy financial system, nor to corrections or adjustments of excesses, but rather to the delusions of a system that has been in place for years. frankeinsteinian capable of anything. Let us look at some very significant examples in recent weeks which, however, have paradoxically had rather localised devastating effects until today: (more…)

2015 could well be an annus horribilis for the traditional investor.

Before listing some of the risks we will face this year, let us define what we mean by «traditional investors». This term covers the vast majority of retail investors and even many institutional investors. These are the investors who put their money into traditional fixed-income and equity products typically marketed by banks. In other words, bonds and listed shares, as well as investment funds of all kinds that invest in these same assets, paying hefty commissions to the distributors (banks) to place them with their clients. Assets that performed well years ago, when the financial system was not overwhelmed by debt and the actions of central banks.

We must not lose sight of the fact that the conditions are ripe for most investors to have a disastrous year: (more…)

Have you won the lottery jackpot? The first 5 decisions you need to make.

Most lucky lottery winners end up losing their entire fortune within a few years. This is a quasi-universal law that affects the vast majority of lottery winners, as bad decisions start as early as the first minute after the draw. Let's see how bad decisions can be avoided in the first days or weeks after being chosen by the goddess Fortune. We will summarise them in 5 essential decisions and present them to you in the usual chronological order in which they should be taken.

The first The golden rule would be maximum discretion. The fewer people who know that we have won the jackpot or any other lottery, euromillions, etc., the better, much better. Not only for security reasons, but also to avoid, as far as possible, becoming a tempting lure for fraudsters, tricksters and unscrupulous and unscrupulous investment hunters. And bankers should also be included in this bag, as they will immediately be on the lookout for their prey as soon as they smell the blood of the nouveau riche and its irresistible liquidity. However, some bankers will have to be told, since the winning tenth or tenths must be deposited in a bank for collection and the corresponding 20% withholding, in other words, the first tax bite from the State. But be careful, (more…)

Generating income in a scenario of expensive bonds and rising rates.

Generating income when rates can only go up, and doing so in an environment of recession or anaemic growth, is at best a pipe dream. The fact is that there comes a point at which trying to scrape a tenth of a yield by adding risk (and we are not talking about mere volatility but the dreaded insolvency) is not only reckless but also increasingly difficult to achieve. A few examples to illustrate this point: The Spanish 10-year sovereign bond, with government indebtedness of 100% of GDP and its persistent public deficit of -7%, offers an incredible yield of 1.96% per annum. Or the high yield corporate debt of companies in the developed world, as over-indebted as the countries, with yields that are less and less «high» and which will be mercilessly crushed by the rise in interest rates. And what can we say about Greece itself, the paradigm of insolvency and the impossible rescue by states also in need of a bailout, offering a ridiculous 7.79% for 10 years. In other words, the investor receives 7.79 per annum in exchange for Greece being able to pay back its euros intact in 2024... Insane. The sovereign debt that many investors have in their portfolios (ignoring the fact that there is life beyond traditional listed fixed income), which has risen as much as the Spanish risk premium has fallen in the last two years, reminds me a lot of the turkey sentiment before Christmas... (more…)

Is there life beyond Bestinver?

Most of you will already be aware of the scandal surrounding Francisco García Paramés’ departure from the investment management firm Bestinver. Let’s just say that the Entrecanales family, owners of the fund management firm, and through their brand-new director Luis Rivera, have provided the perfect example of how to ruin Spain’s best fund management firm and a manager who is a European benchmark in the world of value investing in one fell swoop. Furthermore, it is not only personal relationships that have led Paramés to set up his own future fund management company, but also his two right-hand men: Álvaro Guzmán and Fernando Bernad, who they have just announced who will remain at Bestinver only until the end of the year to ensure a smooth transition. After all, it would be a real shame not to know how to look after, cherish and retain the «European Warren Buffett» in your company, working alongside him and his team for as long as necessary. (more…)

Fixed Income 2.0

La renta fija tradicional, en forma de bonos emitidos por Estados y empresas, está pasando por momentos muy complicados. El abuso de endeudamiento por parte de los países desarrollados -y cada vez más también los emergentes-, junto con la fabricación de dinero por parte de los bancos centrales a niveles jamás vistos, hace que la renta fija sea cada vez menos fiable en general. Si fabricamos dinero de la nada sin anclarlo a nada, la deuda se convierte en meros dígitos cuya solvencia queda cada vez más en entredicho, ya que los ingresos y la capacidad de generar flujos de dinero para devolverla quedan cada vez más ridículos respecto a la cantidad debida. Y eso ocurre tanto a las empresas como a los Estados de los llamados países desarollados.

Si además añadimos a ello una política sostenida durante años de tipos de interés a prácticamente cero, y unas facilidades de recompra de activos por parte de bancos centrales demenciales, tenemos como resultado que la deuda más solvente (sic) como la alemana o la estadounidense está en tipos negativos. Y como consecuencia, el resto de deuda de países paradójicamente hiperendeudados, también goza de unas primas de riesgo mínimas, es decir que pagan extraordinariamente poco por recibir dinero prestado. (more…)

The fund selector and the fund salesman are different animals.

Revealing and extensive data can be found at this report by Cerulli: European Fund Selector 2014, Decoding the buying process. It clearly shows the differences in fund selection criteria that exist between true fund selectors, who are looking for good long-term returns, and mere fund salesmen/distributors, who are only looking for material to place in exchange for juicy commissions.

FundsPeople extracts some interesting graphs such as the one below, in which we see a clear distinction in the difficulty encountered by the funds in being validated by different agents in the investment world. Investors' rigour and stringency was rated between 1 and 5, with 5 being the most demanding level to pass investor due diligence. Among the most demanding group when it comes to approving the investment of their money in a given fund are pension funds, investment accounts of insurance companies, consultants/advisors, investments linked to insurance (e.g. unit linked) and family offices. (more…)

Analysis of the turkey the day before Christmas.

The turkey paradox is the story in which one of these animals is fattened and cared for throughout its life by its owner, with the intention of eating it on Christmas Day. The paradox comes from the turkey's own subjective view of events, who is pampered, fed and cared for excellently throughout its existence. And nothing makes him think - if turkeys could think - on Christmas Eve that this magnificent owner is going to cut his throat and eat him the next day, after a lifetime of attention from the best friend. I say friend, the best father! Many of you are already familiar with this turkey paradox, but it will be interesting to think about the options for analysing the turkey's situation if we use it as a metaphor that can be extrapolated to any investor, with Christmas Day being the metaphor equivalent to the fall in share prices in the investor's portfolio. (more…)

(+34) 93 626 47 75

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Category: Reflexion

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

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

The side effects of Central Banks are already here.

2015 could well be an annus horribilis for the traditional investor.

Have you won the lottery jackpot? The first 5 decisions you need to make.

Generating income in a scenario of expensive bonds and rising rates.

Is there life beyond Bestinver?

Fixed Income 2.0

The fund selector and the fund salesman are different animals.

Analysis of the turkey the day before Christmas.

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Cluster Family Office

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(+34) 93 626 47 75

(+34) 91 794 19 82