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Almost a year ago, we introduced you to the concept of resilience as it applies to investors: The Resilient Investor. Leaving aside the income from work that clouds our perception of success or failure in our financial investments, I would like to emphasise the value of resilience in our investment life itself.

Our capacity to invest is obviously limited in terms of amount, but it is also limited in terms of time, and that is what we call our investment life. It’s hard to invest before the age of 20 or after the age of 80, and of course human nature means we have to approach it differently depending on which stage of this investment journey we’re at. But as we’ve already told you in Benchmark Personal and the Attorney General's Office on the subject of article by JMDV Even though it goes by the same name, there are almost endless variables that we need to manage throughout this investment cycle, without losing sight of our core objectives.

But there is another very interesting concept that we can and should apply to our investment journey, and which will help us improve our success rate over the years. Not only must we learn from our mistakes to turn our losses into investments, but even when the results are acceptable or successful, we must constantly strive for perfection. We can refer to this quest for constant improvement in our investment performance in many ways: the Cluster Effect, Kaizen (Toyota) or more philosophical concepts such as the search for the path or Thu of Zen Buddhism. In any case, this constant effort to improve our analysis and the decisions that affect our wealth throughout our lives will keep us safe from the greater dangers such as euphoria, panic or a lack of humility in the markets and in investing in general.

You can find more information about the app at Kaizen business-related content on the best website for discovering the contrasts, technology and modernity of Japan: Kirai, a geek in Japan. You will also find references to the economy before and after the bursting of the Japanese bubble here y here. I'd like to send our friend a quick hello from here/geek Héctor, whom I had the pleasure of visiting in his beloved Tokyo a few days ago.

The PGR must be constantly reviewed and adapted. At least once a year, we should update it whilst applying something akin to the classic approach to our financial decisions Shewhart cycle (Plan, Do, Check/Study, Act). A form of constant, ongoing quality control that will help us avoid costly decisions regarding our assets over the decades.

It goes without saying that we must adapt all of this to the current economic cycle. But be warned: if we enter a recession, we will have to adapt our protocols, strategies and decisions to a scenario very different from anything any of us has experienced before. The The Great Depression The 1930s are too far back in time, and what’s more, today’s globalisation means that the nature and course of a recession nowadays bear no resemblance to the one our grandparents experienced. However, this globalisation could also exacerbate the effect known in economics as Phoenix, that is to say, rising from the ashes, just as Argentina did and continues to do following its famous ‘corralito’, or Japan, as we can see in this documentary aptly titled Japan: The Phoenix (I recommend at least the first part). In any case, the Kaizen will help us to preserve and grow our wealth throughout our investment journey.

El pasado Viernes Santo 21 de marzo, festivo y por tanto sin actividad en los mercados americanos y europeos, llega la noticia de Standard & Poor’s: Apunte de posible rebaja en la calificación de Morgan Stanley, mantenimiento del Outlook negativo a Merrill Lynch y rebaja de estable a negativo del Outlook de Goldman Sachs y Lehman Brothers… Impresionante.

Deberían avergonzarse de rebajar las calificaciones de riesgo de los bancos de inversión americanos cuando es una obviedad y el clamor popular ya lo ha sufrido días, semanas o incluso meses antes. Sus downgrades a toro pasado dejan en evidencia su incompetencia o mala fe cuando omitieron advertir al mercado del incremento real del riesgo. No olvidemos que ese es precisamente su oficio, son profesionales de la calificación del riesgo de las empresas, especialmente de los bancos de inversión. La realidad del mercado es tan cruda que sus esperanzas de que sin recalificaciones políticamente incorrectas, las cosas volvieran a su cauce, se han desvanecido. No han tenido más remedio que quedar en evidencia tarde y mal. Pero su apuesta era clara, cruzaron los dedos para que su complicidad en la incipiente crisis se resolviera en unos meses con una falsa alarma y que las aguas volvieran a su cauce. No sólo su coste «político» habría sido cero, sino que además pueden haber sido cómplices del cohecho mayor y más grave yo diría que de la historia moderna. Y ese presunto cohecho habría tenido lugar tanto si las aguas hubieran vuelto a su cauce como si por el contrario la cruda realidad les deja en evidencia como ha sucedido realmente.

Todos conocemos las artimañas que realizan los trileros para engañar y estafar a incautos y turistas en sus improvisadas mesas de juego callejeras. De vez en cuando permiten que el gancho camuflado entre el público acierte en el juego y se cobre pretendidamente sustanciosos beneficios. Y eso anima al incauto a apostar porque le da confianza en el sistema de juego y cobro de apuestas. Sin embargo estas recalificaciones indecentes a toro pasado de S&P; ni siquiera llegan a la categoría de pantomima para dar credibilidad a sus calificaciones, puesto que son los últimos en aceptar públicamente el aumento de riesgo en los bancos de inversión americanos. Han movido ficha por vergonzosa obligación, ni siquiera por decoro profesional.

«Standard & Poor’s is the world’s foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. We supply investors with the independent benchmarks they need to feel more confident about their investment and finandial decisions.»

Standard & Poor’s.

No obstante, las calificadoras de riesgo no han sido las únicas responsables de la actual crisis de crédito como ya comentamos allá por el mes de agosto del 2007 en El Síndrome Ponzi y la actual crisis, pero sin duda sí son unas de las principales protagonistas de este drama. Y estos burdos movimientos trileros a toro pasado no hacen más que dejarlos en despreciable evidencia.

Pero es que además del falso control del riesgo ejercido por estas calificadoras, también entidades de la talla de Société Générale o Credit Suisse se sacan de la manga corruptos y/o incompetentes empleados que realizan operaciones opacas o valoran erróneamente activos bancarios, respectivamente. En este último caso de CS, dicha «valoración incorrecta» les ha obligado a revisar sus resultados del último trimestre e incluso a modificar el ejercicio cerrado ya del 2007 y por supuesto lo que llevamos del presente 2008. El mercado financiero me recuerda cada vez más al camarote de los Hermanos Marx: Más madera, es la guerra…y también dos huevos duros, aunque de la visión de Groucho del crack del 29 ya trataremos en un próximo artículo.

Pero no todo es desvanecimiento del suelo bajo nuestros pies: Las escaramuzas entre carroñeros para alimentarse de los restos del cadáver de Bear Stearns (os recomiendo leer las FAQs para shareholders de su web, no tienen desperdicio) son el mejor indicador de la luz al final del túnel. La rabieta de Joseph Lewis a quien le han soplado 1.200 millones de $ perdiendo 98 $ por acción, y los movimientos de Deutsche Bank para pujar por Bear son los mejores garantes de la solvencia del sistema. Mucho más que los profesionales de la calificación de riesgos que merecerían un escarmiento ejemplar.

Habrá que empezar a buscar otros indicadores de riesgos, porque las brújulas de las clásicas calificadoras han perdido el norte y la vergüenza. ¿Dónde está la bolita? Ni lo saben, y lo que es peor, ni les importa.

Assuming that a deflationary scenario is the most likely outcome in the coming years, let us examine how an economy in recession, such as Japan’s, has fared over the last two decades.

The first thing that might strike us as odd from a Western perspective bubble-maker The fact is that the stock market may not rise for more than two or three years. This truism is not so obvious if we stop to think about it carefully. From our recent European perspective, five, three or even just a single bad year is enough to recharge our batteries and set off another bull run on our stock markets. Even the Dow Jones has got us used to these timings cyclical since 1982, although we must bear in mind that in 1965 it stood at around 1,000 points, exactly the same as in 1982. But During periods of deflation or recession, the slump in the stock market can last so long that we should stop thinking of the stock market as a short- or medium-term investment vehicle. At least in domestic markets, or within the scope of that recession if it does not spread globally.

For example, here is the Nikkei itself, with its sobering chart from 1990 to the present day. In other words, over the course of 18 years, it has lost a staggering 701% of its value. A lifetime of investing. An exasperating recession that seems to be dragging on forever, with no end in sight.

Well, what has happened on the Japanese stock market is simply a reflection of what has happened in the country’s economy. Property prices, raw materials, wages and even a simple bottle of Coca-Cola have also been affected by this apathy or a gradual decline. Everything was more expensive 5, 10 or 15 years ago. Inconceivable for most of us, isn’t it? Many of you will remember that Japan used to be an expensive country, with the cliché of a coffee or soft drink costing almost 1,000 pesetas right in the centre of Tokyo back in the distant 1980s, when Spain was still ratifying its accession to NATO. Today, that drink would cost even less, between 700 and 900 yen. But the fact is that a Coca-Cola or a beer on the best terrace in Madrid or Barcelona also costs around 4, 5 or 6 euros. More examples: Nowadays, at any vending machine vending In Japan, a half-litre bottle of Coca-Cola costs 120 yen, which is 75 euro cents; and a standard set meal in any restaurant in Japan costs 6 euros, including a drink. You can even still find ‘everything for 100’ shops – yen, of course – meaning everything for 60 euro cents, or, in other words, everything for one US dollar. Obviously, the comparison with Spanish or European prices is stark, and if we compare it with prices in Britain and the pound, even more so.

Although this situation in Japan over the last 18 years may seem idyllic, deflation and recession can lead to extremely serious macroeconomic problems, as my colleague has already explained GFO in 'Inflate or Die'. So why has Japan managed to cope so well with this formidable deflation/recession, which has now been around for quite some time? How can we in the West deal with a hypothetical similar scenario? The answer is that Japan is a world away from Western ways of life, education and customs. To live with deflation for such a long period and maintain the health of the Japanese economy, one must have high productivity combined with a weak currency that allows for comfortable exports. Paradoxically, however, the Japanese population is quite thrifty (a logical reaction to a crisis) despite the fact that their banks do not pay interest on these savings in yen but do so in other currencies. And this fact does nothing to facilitate the revival of domestic consumption that the economy needs in order to grow.

If we compare these conditions with those found in Spain or Europe, the picture is bleak. Productivity is much lower and the euro is sky-high. Given this scenario, the ability to cope with sustained Western deflation over time gives pause for thought. The negative chain reaction scenario described by my colleague GFO It would indeed be devastating, but we must bear in mind the reality of the situation in Japan following 18 years of recession. Deflation in Japan does not reflect a nightmarish situation at all. What is more, day-to-day life for the average citizen is much more reasonable than the surreal excesses experienced in the late 1980s. Of course, we are not saying that it is a healthy or exemplary economy; the country and its companies face many difficulties. But we certainly see it as an example of how to tackle and survive prolonged deflation. Japan remains a member of the G7 (G8 including Russia) after nearly two decades of enduring the potential domino effect that could have irreversibly damaged the foundations of its economy (employment rate, productivity, businesses, banking, etc.).

We could therefore say that a deflationary scenario or a Western recession might bring things back to a more reasonable level after a period of lavish excess, but we should take a leaf out of Japan’s book if we want to avoid some of the terrible consequences that a recession brings. And that, dear friends, seems anthropologically very difficult for us Mediterraneans and Latinos in general.

For the time being, perhaps we should start to consider the idea that putting our money into equities may only be a sound investment in the long term. And when we talk about the long term in a recessionary environment, that timeframe can stretch far beyond what we are used to. It wouldn’t be a bad idea to start thinking a little more like short- and medium-term investors in emerging markets that are far removed from the deflationary scenario. Or perhaps to start thinking that our wealth growth should rely a little less on unproductive stock market speculation and a little more on corporate or employment income directly linked to productivity. I know this may sound like gibberish to many who are used to making easy money on the stock market, but in reality it makes perfect sense.

Although the outlook is likely to be a long one, we must not underestimate the ability of the world’s still-leading economy (the US) to emerge from the recession. Perhaps the Americans, despite all their economic and mortgage problems, will be able to overcome the deflation that seems to be looming over them (and us) much sooner than Japan. For the time being, unlike Europe, the US appears to be doing its homework: a currency at levels that facilitate exports, higher productivity than Europe’s (see chart below) and a cabin depressurisation which is forcing the Fed to cut $ rates to levels where mortgage holders and their banks can breathe on their own and take off the oxygen masks that have suddenly come down from their ceilings (central bank interventions and aid from the Bush administration).

It seems that we Europeans are destined to play the role of self-sacrificing carers for our American patient, although perhaps we’re just playing the part of incompetent fools. Never mind, the important thing is that the US overcomes this bleak scenario as soon as possible and pulls our old continent out of the mire. In the meantime, we should look to the only example of deflation/recession we have in our modern economy and learn how the Japanese weather and endure its effects.

We must realise that no one has said this will be a brief and fleeting affair. After this upheaval, nothing will be the same in the Western economy. It may be a long and arduous journey, but although many structures will be damaged, we will likely avoid a total collapse—at least of the vast majority of the system.

Goodbye, baby.

Our friend and prolific blogger JMDV has published Tuesday y Wednesday two summaries of the Bestinver Annual Conference. That is something that those of us who were unable to attend the conference are very grateful for, because Paramés It has, by its own merits, earned its place as a benchmark from which to learn, albeit always with a critical eye. Given the timing—coinciding with the Conference and JMDV’s summaries—this may not be the most opportune moment to publish this article, which, incidentally, had already been sitting in the «Drafts» folder since last Saturday. Or perhaps it is. In any case, here it is, just as I wrote it last weekend:

Thank you Fernan2 for always exercising good judgement in choosing the Spotted here and there 😉 Well then, through one of your links, I’ve come to this a brilliant article by Julio Cuesta (quant_Notes). I must admit, to my shame, that I hadn’t read it before.

To put it very briefly, Julio Cuesta (quant_Notes) is conducting an experiment Monte Carlo to put the successes of the best investment fund managers into perspective. In it, he demonstrates that, statistically speaking, given a sufficiently large sample, there will always be some fund managers who, purely by chance, will outperform the expected benchmark for a limited period. This is not down to any merit on the part of the managers, but purely to statistical chance. I recommend you take a look at it before we continue with our analysis.

That said, let’s start nitpicking about this experiment or at least put a few thoughts out there:

Let’s extrapolate this simulation – in which pure chance outperforms the market, given the large number of failed funds and fund managers – to other scenarios outside the stock market. For example, the probability of being happy with your partner for the rest of your life. Following the approach of the quant_Notes simulation, one might think we should consider the history of all couples as variables, rather than just those who have not divorced or separated. Only then would we have a clear idea of what, statistically speaking, lies ahead for a young person who is about to start sharing their life with another person. Following the same line of reasoning, an investor who, by contrast, places greater trust in one fund manager over another, would be the one inclined to think that a couple who have enjoyed many years of a happy life together must be doing something better than others who fell by the wayside.

It is hard to imagine that someone who has been through 5, 7 or 12 divorces or separations is just as likely to be happy with their partner until death do them part, and that they have simply been less fortunate than their friend, the perpetual monogamist. It is implausible that the only difference between couples who change partners as easily as they change their underwear and those who are stable in the long term is mere chance. I find it hard to believe that they are part of the so-called survival bias. The same could be said of someone who changes jobs or stays in the same one until retirement. We could find countless other examples that could be extrapolated in the same way. Is it merely chance, or are it different personal profiles and idiosyncrasies that determine the future trajectory of a relationship or a job? Similarly, is it merely chance, or are it different management approaches that determine the success or failure of an investment fund?

I am not saying that I do not partly agree with the conclusions of this experiment, but I refuse to believe that human ability is incapable of beating the market, any more than chance itself can. However, the strategies of successful fund managers can easily become obsolete and useless in the face of the rapid evolution and drastic changes our global economic landscape is undergoing. And that places greater responsibility on chance for the performance of successful funds – past, present and future.

The curious thing – and it is true – is that, given the vast number of fund managers and funds that are constantly being created and disappearing, the historical data that should enable us to separate the wheat from the chaff is simply too short. In other words, we should compare the results, taking into account this survival bias, against a t=100 or 1000 – that is, 100 or 1000 years of historical performance data – to be more certain that there is more to it than survival bias o survivorship bias in their successes. Five, ten or twenty years are, mathematically speaking, insufficient time horizons given the vast number of fund managers out there. The failure of the successful ones may simply be a matter of time, if their results are truly the product of chance. But even so, given that our lives as investors are finite and limited to a few decades at best, we need only happen to come across the «t» successful managers during that time. It should matter little to us whether time attributes success to good management or to chance, for as far as those of us who were fortunate enough to witness their «t’s of success are concerned, they were the best managers. Furthermore, investment environments are so volatile that supposedly successful management strategies will cease to be so over a time horizon extending beyond a few decades. Therefore, in reality, we will never know whether past success was down to management or mere chance.

We could say that markets have a component stochastic which we cannot ignore, but from which we must learn as much as possible determinism of some managers.

So, is it part of Paramés an elite group of fund managers whose strategy is capable of consistently outperforming the markets? Or, on the contrary, is it part of the survival bias, along with the rest of the global ranking of the best stock market fund managers? In my opinion, it is a genuine crack as a fund manager, even though his job requires him to rotate his portfolios, perhaps more frequently than he would personally prefer. But we must thank Nassim Nicholas Taleb that opens our eyes with its «Fooled by Randomness» and with «The Black Swan«. The first book, to put into perspective the historical success stories we are so fond of; and the second as an exercise in humility in the face of what the stock markets have in store for us from today onwards. Two works that will undoubtedly lead us – fund managers and the markets alike – to view one another in a new light.”.

Before you start booing me, I promise you that my colleague gfo will publish the reply to the riddle in a couple of days. By the way, there are over thirty comments, and they’re all brilliant. That said, let’s move on to something else.

I’m sure you’ve all read the article by José Mª Díaz Vallejo in which he discusses a topic that is as little-known as it is unpopular: considering and setting the return target for our investments in the markets over the course of our lives. He very aptly calls it Personal Benchmark, and defines it as «the annual return target based on a longer-term target«. Simple, yet vital and by no means obvious. As this issue relates to the evolution of a person’s wealth throughout their lifetime, it forms part of the standard analysis we carry out as a Multi-Family Office. José Mª, would you mind if we ran a few thought experiments based on your concept? Here we go:

We usually hear the word benchmark associated with fund managers, indices, charts, etc., and we equate this with target a target to reach or exceed. But JMDV applies this wisely to his own investment profile:

• Beating inflation in the long term (4%)
• Developing a pension plan with a 40-year time horizon
• Start-up capital
• Time remaining (40 years)
• Dividends
• New regular contributions

Based on these variables – which only he himself and the passage of time can clarify and refine – he estimates that he will need an annual return of 8–9% over 40 years to reach his Personal Benchmark desired. Let us consider this benchmark as an example type of a 25-year-old, but which could be extrapolated – with a few adjustments – to any of us if we imagine it in our own terms.

Let’s move on to the experiments now and explore this concept of personal benchmark: First of all, let us consider that regular contributions not only can, but must to grow at an accelerating rate in line with our professional and career development, or even our potential future inheritance, if any. We must also bear in mind that our personal development will likely mean we are unable to maximise our contributions. In other words, over the years we will probably share our lives with partners, buy property, possibly support children… and perhaps even become parents ourselves.

We do not know what the future holds. Perhaps our career progression will be meteoric or mediocre, or perhaps our health will be poor. Family circumstances will also affect the growth of our wealth: for example, we may need to set aside substantial sums of money for personal and/or healthcare for elderly relatives. Or we may have to rescue our nieces and nephews from destitution because of the foolishness of our dim-witted brother-in-law. All these variables – which also change over time – force us to constantly adapt our personal benchmark.

Another factor to bear in mind is happiness: in other words, it is not only our personal development that will prevent us from maximising our regular contributions to wealth growth. We must also find happiness along the way. After all, it will be of little use to us to be the wealthiest yet most embittered pensioners in our circle, however eager our descendants and heirs may be, hungry for property and fresh cash. Our financial and wealth growth throughout our lives must allow us to strike a balance between financial optimisation, happiness and well-being – a balance that only we are capable of intuiting and shaping.

Savings/Investment and Happiness/Well-being are not always interconnected, as one might think. It is true that most of us tend to go to extremes when allocating resources in the pursuit of happiness and well-being. Such excesses often result in our financial progress becoming increasingly mediocre over time. And because of this mediocrity, as the years go by, we will be forced to recklessly increase our personal benchmark. The consequence of this is that we take on fatal risks, which, at best, will cause us to build up and lose wealth cyclically throughout our lives, thereby turning our lifetime financial progress into a financial rollercoaster. But at the other extreme, sometimes the massive concentration of resources for reinvestment and the pursuit of our benchmark, causes us such distress and unhappiness that we will be unable to achieve a stable personal life. This personal, family and social unhappiness will also have a negative impact on our ability to create wealth, thereby also hindering the personal benchmark designed.

The ideal balance is personal and unique to each individual, and can only be achieved by masters of life. Furthermore, only the final result determines whether we succeed or fail, and during our youth we will have no indication that would allow us to make adjustments based on interim results. As my favourite quote on the sidebar of our blog says: «…we don’t learn to live until life is gone».

We are also going to introduce other types of assets, such as property and businesses, into our experiment with the personal benchmark, as clearly defined by JMDV. It is evident that if we only take our cash holdings into account, the 8-9% set as a long-term target will deviate significantly – either by falling short of or exceeding – the personal benchmark that we will need throughout our lives. All our assets, in every possible form, will influence the definition and development of our benchmark.

Let’s carry on with the experiment. Let’s try to balance this benchmark as if it were an accounting balance sheet with its classic formula: Assets = Liabilities + Equity, but adapting it to our financial situation. Taking into account all our assets (cash, businesses, property, etc.) and all our liabilities (debts, mortgages, etc.). But we will also add to the liabilities our cost of living – that is, the amount of money we spend (for those with small estates) and the amount we would like to spend (for those with medium or larger estates) – including the cost of repaying any mortgages we wish to take out. What our Multi-Family Office once dubbed Vital Balance, which includes our Wish List or wish list. You can find further details at: His current wealth is enough to turn his life around.

But let’s take it a step further and have another look at the personal benchmark turned into life balance. We are now going to introduce intangible assets and liabilities – that is, those that cannot be easily quantified in monetary terms or valued in the same way as a business or a house. We are referring to values that are just as important – or even more so – to our lives, such as family, time, philanthropy, starting up businesses or pursuing long-cherished activities, special trips, and so on.

All of this, tailored precisely to each individual or family, will enable us to design the restructuring required for our assets to cover our liabilities and continue to grow and progress at the desired rate. This growth must, of course, exceed a constant average rate of inflation, which, incidentally, we also estimate at 4%. However, let us clarify that we must consider three types of growth here: cash flow growth, corporate growth and property growth in the form of mortgage repayments. To balance the books, we tend to disregard growth arising from property capital gains, and this is particularly advisable in the current cycle.

As you can see, the Personal Benchmark as defined for our cash, forms part of this Vital Balance, in a way. The family’s overall financial situation and how it has developed will give us a clear idea of what we call PGR: Global Wealth Plan.

Therefore, José Mª, your very insightful comments on the Personal Benchmark could be included as one of the many components of a PGR. And I think your article is highly recommended for all investors, regardless of their investment style: fundamental, technical, value, contrarian, sui generis and, above all, for the one that is most prevalent: the chaotic one.

Although, in our view, the best course of action for any investor is to draw up and periodically adjust their PGR, I think it is extremely dangerous that the vast majority of investors do not even consider at least one personal benchmark. Those who merely focus their benchmark In the annual benchmark index, they are nothing more than small inflatable mats on which their landlubbers splash about, pretending to sail across a vast ocean. When the sea is calm, they move almost in parallel with other vessels, believing themselves to be true sea dogs. But when storms and rough seas strike, only the reliable, powerful and well-skippered vessels stand any chance of surviving until calm returns. The rest will continue to work hard right up until retirement to make up for what they lost on the high seas.

Forget the inflatable mats and start thinking about your Personal Benchmark and Global Wealth Plan. You’ll be glad you did when you’re older.

For those who haven’t read it yet, I’d recommend this enjoyable, short and entertaining little book, which makes us reflect on the sustainability of our economic system: The Time Seller, by Fernando Trias De Bes.

I also think this video, entitled Money as Debt (Translated into Spanish here (though the quality is poor), which my friend and colleague recommended to me Global Counsellor. Of all the videos and documents that recount the origins of money and its perverse the effects caused by the reckless building of financial houses of cards; I find this particularly clear in its first half.

It’s a 47-minute video, and I think that with those first 22 or 24 minutes, plus reading the book, we could spark a very interesting debate. Perhaps many of you are already familiar with it, or have seen other videos and animations on similar topics that have taken the internet by storm in recent months. Although the second half of this one veers into «conspiracy theories» that I do not share at all, I think watching it will be interesting for those who haven’t seen it yet. It is important to bear in mind that both the book and the video were conceived before the current credit crisis. To be precise, the book was written over three years ago and this video is dated February 2007.

In contrast to the video, I’ll quote just a couple of sentences from the book:

“When Rosa Regás won the Planeta Prize, I was driving my car and heard the award ceremony live on the radio. Rosa Regás said: ”Thank you for this prize. ‘With this money, I’ll be able to buy something that isn’t for sale: time.’ After hearing that sentence, I began to imagine what would happen if, in a society like the Western one, time could be bought. The result is this book.” Fernando Trias de Bes.

Xavier Sala-i-Martín, for which, as you know, I have a particular fondness, had this to say about this novel:

“It is an extraordinary example of what happens to an economy when the free operation of the mechanisms that balance markets is not ensured, an example of the disaster that looms when prices are not allowed to move freely, when people are forced to pay for things that should be free, or when unnecessary taxes are imposed on society.”

One of the first questions I’d like to raise – of the many that may arise – is this: to what extent are we purging these excesses through the current credit crisis? I’d like to compare your views and your outlook on the current and future situation. I hope that both the reading such as the video if this is of interest to you, and above all I hope we can discuss them in your comments. There is no doubt that this is the most significant issue in today’s financial world. After all, it is the markets that will depend on how this situation develops, and not the other way round.

As has rightly been said Fernan2 in a recent comment on Search, compare, and if you find something better… move elsewhere: «The truth is, to write something like that and not have anyone jump down your throat it speaks volumes about the calibre of your audience 😉«I fully agree.

In our previous article The Relocation of Wealth (I) It is reported that two fortunes are moved abroad every day from Spain or France alone, with those from France mainly going to Switzerland. The relocation of wealth should not be confused with tax evasion. Simple tax evasion causes less damage to the coffers of high-tax countries, as although such cases are far more numerous, they are partial and some are even temporary or circumstantial. However, the relocation of wealth is definitive and total. It almost always represents a move towards a better quality of life and a more favourable tax environment. It also tends to involve the transfer of large fortunes that were previously paying (as I mentioned Cachilipox) based on income, profits, assets and consumption – enormous sums of money. This relocation deals a severe blow to the country’s treasury, which until then had held that fortune. The example of the article As mentioned, this is clearly an American example and therefore difficult to apply to Spain, but we feel it is illustrative.

In light of these relocations, let’s talk about a phenomenon that is becoming increasingly evident: Tax competition between countries. Globalisation has also reached the point where supply and demand Taxation policies in different countries attract capital flows from one state to another. Perhaps we should now leave behind the notions of the unsympathetic rich, tax evaders and other commonly used labels, and begin to realise that by demonising their behaviour, we will achieve nothing as long as neighbouring countries offer more favourable tax conditions to our wealthy citizens. I’m not saying this is a better or worse scenario than the old «Either pay up, in accordance with current legislation, or go to prison«, it may well be even more unfair. But that’s the harsh reality; these days it’s more a case of a «you pay, in accordance with current legislation in Spain (with 17 regional laws in force where (choose) or pay in accordance with the legislation in force in any other country that offers you better conditions«… Something like the old «’Have a look, compare, and if you find something better relocate.»

What was previously seen as a matter of ethics and solidarity towards the poorest within the same state should increasingly be treated as a matter of the market and fiscal globalisation.

That is why the poorest countries that impose lower taxes on the fortunes of the wealthy from neighbouring countries will attract them to a greater or lesser extent (such as Malta, Ireland, Uruguay, Belize or the Eastern European countries themselves). This enriches their public coffers, enabling them to become less and less poor. This creates a certain market-driven redistribution of wealth; however, we need to shift our mindset away from nationalism to understand this and think more in terms of globalisation, including on tax matters.

Some might say that, traditionally, the most tax-friendly countries are not exactly poor – quite the opposite, in fact – but let us ask ourselves what the main source of their wealth is… How wealthy were countries such as Monaco, Luxembourg and Switzerland years before they introduced favourable tax laws?

It may not be a fairer scenario – or perhaps it is – but globalisation is leading us in that direction. Whether we like it or not. We can think of countless examples of debatable fairness that we could compare: Is it fair that fruit growers in Europe, in the absence of protectionist laws, lose market share to African or South American farmers who charge less for their produce? Is it fair to pay €3, 6 or 12,000 per square metre for a property? Is it fair to pay 10 or 100 times a company’s intrinsic value for a single share? Is it fair for a wealthy individual from country A to shift their tax liability to the treasury of country B, which charges lower tax rates? Market realities sometimes overshadow justice.

But does the market disregard justice, or does it interpret it differently? It is debatable whether it is fairer for a European to have to give up their job or business in favour of poorer workers and businesspeople in the Second and Third Worlds. It would also be questionable whether a Volkswagen worker in Navarre should lose their job in favour of an unemployed person in Slovakia or Romania, where new car factories are being built. Or whether it was fair to the German worker who became unemployed following Volkswagen’s relocation to Navarre. It basically depends on the colour of the glass through which you look at it. If we think globally, the laws of the market often redistribute the world’s wealth to some extent.

Whilst some people remain outraged and continue to hurl insults at MPs and the wealthy because of their unpunished collusion, perhaps we should accept a multinational reality in which ethics or immorality are to be found in the very laws of the free market. Laws which, paradoxically, can redistribute the world’s wealth more efficiently than politics itself. And the flow of wealth in search of lower tax rates is no exception.

Whether we like it or not, the global tax landscape is moving in that direction. Putting up barriers to the countryside has always proved very difficult. A SICAV or the waiver or abolition of gift tax, to give a few examples, are no longer malicious strategies devised by the rich for the rich. They are the natural evolution to avoid absurd barriers in the field. And globalisation has turned tax systems across the entire planet into one vast field.

«It is clear that there are many other effective ways of investing money besides gambling on price fluctuations. For example, the purchase of securities of stable financial organisations in countries with developing economies. Such financial instruments are risky instruments, but the risk is compensated by high profits. In addition, serious HYIP organisers prefer to reinsurance and invest part of the funds deposited in the securities of safe and stable companies».»

Another pearl is the unabashed warning that these programmes have a short-term end other than the collapse of the pyramid. And they constantly hammer home the point that the «real» ones are self-liquidating by returning the principal to the investors. Obviously the end is the same for all:

«The nature of high-yield investment projects has the following peculiarity: practically all of them cease to exist at a certain point. Pyramid-type programmes collapse, burying with them all the investments of the clients; and serious HYIPs terminate their activities only after repayment of the sums payable to their depositors. It is clear that all honest projects are planned with maximum accuracy and are oriented to a fairly long term of operation. But in many cases the necessity of project termination is dictated by objective economic reasons that are difficult to overcome».»

Attention to this last sentence: «But in many cases the need for project termination is dictated by objective economic causes that are difficult to overcome» i.e. pyramidal collapse, speculative total loss or directly tomaeldineroycorre.

In addition, its unique online payment method (e-money) is particularly conducive to capturing huge amounts of small payments, thus circumventing controls on significant currency movements. Of course, they also offer lucrative pyramid incentives of networking. To finish with the examples (you will find plenty of them on the net), the tagline nomirenopregunte:

«On the other hand, don't forget that most project organisers prefer to keep information about their profit sources secret, fearing dishonest competitors. That is why in many cases high-yield investment projects are absolutely intransparent. However, this in no way influences the regularity of payments and the «honesty» of the programme. The organisers of serious High Yield Investment Programmes are well aware of the effectiveness of mutually advantageous cooperation and will not risk the trust of investors.» (sic)

Spectacular! Personally, I think that the mutilated people left behind by the HYIPs deserve it for being deluded, reckless and unwary, smart alecs... I can think of so many words that I have to bite my tongue. Of course, those who cheat by offering Hyips are con artists in all capital letters, even if they were originally conned and reconverted to the cause.

However, I am convinced that Fraudulent investment propositions will always exist as long as there are investors who even minimally dissociate return and risk. Call them stamps or «intransparent» financial investments, they are nothing more than the descendants of Gregor MacGregor and its Republic from Poyais.

If documents of this kind are allowed on the net, it is because, as I have said before, the internet is like the street, like life itself. And in the street we find all. After all, a website, a blog or a simple pdf document is nothing more than a Speakers’ Corners of a global Hyde Park with genuine freedom of expression. With its drawbacks, but above all with its advantages.

Three cheers for freedom of speech! Hyip Hyip...Hurray!

«Once upon a time… at the end of the 20th century, there was a world in which armed conflicts were largely not religiously motivated, and in which economic growth rates in most countries were more than acceptable. The booming economic sectors: property, business, the stock market… Of course, there was a Third World grappling with serious poverty and health issues, but the so-called First and even Second Worlds were enjoying a period of significant global prosperity. A spectacular future lay in store for some emerging nations, which were awakening to a global market economy that was set to revolutionise the lives of billions of people. Far behind them, almost forgotten, lay the energy crisis of the 1970s and the Iron Curtain with its Checkpoint Charlie or the Cold War between blocs, with a finger constantly poised over the nuclear button. But even having left this turbulent past behind them, the inhabitants of that planet were worried and debated ways to find impossible solutions to what, from their perspective, seemed like major global problems.

Curiously, the people of that time were unaware of just how exceptional the general standard of living in their world was during those years. They remained worried and complained about the possibility that the Mir space station might fall on their heads, reduced to scrap metal because of the Russian economic crisis; they were concerned about the slight slowdown in the global economy compared with previous years.

Meanwhile, there was discussion as to whether taxation might be a more effective tool than monetary policy alone for controlling the foreseeable excesses in global consumer demand. The high volatility of financial flows from the richest countries to emerging economies was also a topic of discussion. If, moreover, these flows were driven by speculative currency trading, the volatility of the global economy could be multiplied. And that did not sit well with economic analysts at the time. Developing countries were urged to introduce measures to control the risks that voracious financial institutions were ignoring in exchange for the investment frenzy these flows generated. emerging markets.

No one ever thought that the danger might come from financial investment flows between first-world countries, let alone from the strongest currencies: US$, GBP and the Deutsche Mark.

It was a world whose biggest problem was engaging in international debate about what the main issues facing the global economy were. A macroeconomic Tower of Babel sailing full steam ahead across the globe, semi-aware of its own sweet, old familiar chaos, yet oblivious to its course. What could possibly have been worse than the economic problems of that time?»

«…And the years went by – let’s say a decade. The landscape of that world had changed completely. By comparison, the present was bleak. Islamic fundamentalism was sowing terror and war in many countries. The West (including Israel and the Vatican) was clumsily attempting to minimise its effects. In many cities, hundreds of thousands of cameras were installed to monitor the potentially dangerous individuals from carrying out attacks against the public. Boarding any commercial aeroplane was also a common practice in that world Orwellian from 1984. Energy was in short supply for those on low incomes. High demand from emerging economies, which were beginning to make a mockery of the figures produced by the exclusive G8, combined with speculation and instability, had driven the price of a barrel of crude oil to record levels. Exchange rates were fluctuating at unprecedented levels and the currency «shelter»It was a newly created currency called the €. The price of gold was breaking every record ever seen. The financial system was reeling as banks lost confidence in one another and interbank lending dried up, forcing central banks around the world to inject liquidity to prevent irreversible breakdowns in the financial machinery. Share prices of the world’s largest financial institutions were plummeting, as were the prices of debt issued by both financial and non-financial companies. The property bubble that had existed in the developed world since the start of the new century, and the credit excesses of the past decade, had damaged the financial health of the global banking sector. Volatility and nervousness – not only on the stock markets, but in everything to do with money – were palpable.

There was talk of a recession as people re-read (rather than recalled) the one endured 80 years ago. But it was difficult to extrapolate what had happened back then to a world that had been in constant flux for almost a century – the most turbulent period in history. Would the current situation cope better or worse with a recession like that one? Moreover, why was the predicted recession not even supposed to be anything like the one of 80 years ago?»

A new world order (still in disarray) had been established, and the majority of the population were not even aware of the new situation. »How could so much have changed in such a short space of time?’”

SHOW YOUR BOARDING PASS!… SHOW YOUR BOARDING PASS!…

My reading was abruptly interrupted. I thought that, given what happened to them in the following decade, the problems faced by that civilisation at the end of the 20th century were nothing but a load of rubbish (apologies to anyone who might take offence). Well, after this first chapter, I thought that perhaps this second-rate sci-fi novel I’d bought for 9.99 $ at the airport duty-free kiosk might entertain me enough. I had to kill time whilst waiting at the gates of the boarding bridges in whichever terminal I was in over the next three days.

Back to reality: I now had to put the booklet away in my briefcase because I was approaching the security checkpoint. I looked over the heads of the crowd and took in the scene to which, surprisingly, we all seemed to have grown accustomed: several rows of barefoot people holding up their trousers, which had no belts. In silence. Resigned. Surrounded by barbed wire converted into modern stainless-steel barriers. Uniformed officers and dogs, both surly and trained, bellowing orders. Thorough searches. Confiscation of toiletries. X-rays. With all our belongings on a plastic tray that we would have to return and stack neatly after the security check, in the baggage reclaim area.

I don’t know why images of Auschwitz or Birkenau which we’ve all seen at some point… I’m letting my imagination run wild – perhaps I should stop reading cheap sci-fi pulp fiction and focus more on the real world.

Crystal balls do not exist. And anyone who claims otherwise is either mistaken, lying or a fraud – or all three. Readers should therefore take the strategic guidelines we are about to discuss with a pinch of salt. Nevertheless, we are going to stick our necks out, as this is a strategy that we believe to be reasonable for certain middle- and high-net-worth individuals.

Let’s start by saying that we are going to propose a long-term strategy, so we must approach these investments with a time horizon of at least five years. We believe that this new year, 2008, is and will be a good year to invest in US assets. This pack The investor has 4 Aces or areas in which to make strategic investments interdependent: Property, Fixed Income, Equities and Foreign Exchange. Perhaps the latter is the most uncertain, but given the fall in short- and medium-term interest rates and the current exchange rate of 1.5 $ to the euro, many investors feel comfortable investing in the US dollar.

Let’s take it one step at a time, as he said Jack the Ripper:

1. Properties located in areas that are attractive to European investors, such as Florida, California or Manhattan itself, have experienced – and are likely to continue to experience – a slowdown in property prices across the board. Houses or flats prime should be at the top of investors’ lists. And although their price has not fallen as much as that of other assets, real opportunities are beginning to emerge that keep their potential for an upward rally intact prime once the sector recovers. Undoubtedly, these are enviable upside prospects from the perspective of those who have suffered in the Spanish property market.
2. Corporate fixed-income markets have suffered and will continue to suffer to an unprecedented extent. The stability of corporate debt with investment grade Since last spring, it has become a veritable cascade of gold knives. A decline that is likely to continue until at least the end of the 2008 financial year. But there are already some very tempting gems to be found with which to start building a portfolio, both in the non-financial sector and, for the more daring, in corporate debt from the very heart of the investment banks rocked by the credit crisis.
3. US equities as a whole have fallen by more than 12% (DJIA) over the last three months. Here we will find large, exemplary companies at prices that are already very attractive. Furthermore, there are sectors such as technology where the decline in the top companies has exceeded 25%. And for those who love a thrill, the financial sector has been, and continues to be, the hardest-hit sector. Its declines to date have been well over 30 and even 40%, and amongst them we see world-class banks such as Citigroup, Bank of America, Merrill Lynch o Wachovia, to give just one example. In any case, for investors with a lower tolerance for risk, it is not a bad idea to steer clear of that financial sector. For further information on the best US equities, please consult the Teacher. If this were a Spanish RV, I would also refer you to the other one Teacher, opposites in every respect, yet both Masters.
4. As for the currency, its greatest appeal lies in the cost-saving benefits it offers for our strategic investment across the three scenarios outlined above. Not to mention that the cabin depressurisation It is forcing the Fed to cut $ rates to levels where mortgage holders can breathe on their own and remove the oxygen masks that have suddenly dropped from their ceilings. Perhaps currency speculation might also yield a capital gain on our investments via the $/€ exchange rate, but the US dollar may also have bottomed out and stagnated, or its undervaluation against the € may even become more pronounced. Let us not forget that this is the mother of all speculation. In any case, investing in a coordinated manner across the three scenarios outlined above, with the euro trading at one and a half dollars, fits perfectly into the overall picture of this strategic investment.

But how can we make an investment like this in a structured, interconnected and coordinated way? The answer is that we are working on it as a multi-family fund office. Firstly, we analyse the strategic opportunity presented by the global economic landscape. We then assess our clients’ interest and willingness to make a structured or tailored investment across all the scenarios mentioned. Once the 4 aces In those areas where we believe it is worthwhile to invest, we focus on selecting and specifying the assets. We then develop a generic framework that suits the majority of our clients, although each structured investment must nevertheless be tailored specifically to each client. Naturally, to achieve this, we have drawn on the help and advice of the leading specialists with whom we regularly collaborate, as well as new partners such as reputable professionals from Royal We will be present in each of the selected markets. And finally, we will seek the appropriate international banking framework to coordinate the management, custody and administration of the assets. At present, we are considering bespoke structures starting from around €700,000. Subsequently, in line with our commitment to adapting high-net-worth investment protocols for smaller investors, we will aim to adapt these structures to amounts below €300,000.

All of this is structured as a Structured Investment scheme that allows investors to invest simply on the basis of the value of the property to be purchased. And to ensure not only that, within a maximum of 15 years, the investor has fully amortised the property, but also that their initial investment has benefited from the dividends generated by the equity portfolio and any potential rental income from the property (if they do not wish to use it exclusively for their own purposes).

Let us not lose sight of the fact that the main motivation for making an investment of this kind is the potential capital gain from each and every one of the four aces. Of course, as these capital gains are realised, the break-even From that point onwards, the period over which we will regard the investment as doubled will be significantly shortened, enabling us to recoup the cost of our property purchase in well under 10 years. In our view, this four-pronged strategy could, in the coming years, deliver truly spectacular returns on our investment, which for the client would not even represent a simple opportunity cost.

Personally, I’d prefer a small flat in Manhattan to a little house in Tampa Bay or Malibu. But this will have to be tailored to each client because, however profitable an investment may be, it’s pointless if it doesn’t make the owner happy. Is the American Dream making a comeback?

We’ll keep you updated…