MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Archive for December, 2010

Happy Holidays to All Our Readers

Thursday, December 23rd, 2010

2010 is slowly reaching its final days. It has been a good year for many investors despite ups and downs and many unsettling questions especially about the banking industry.

It is our mission at MyPrivateBanking to analyse and watch the Private Banking industry and to provide clients as well as industry participants with unique data, insights and comment. We hope that we have achieved this over the course of 2010.

We are looking forward to 2011 that will bring a number of new features and innovations to this website as we strive to make our research and reporting as well as the MyPrivateBanking social network even better. Stay tuned…

And here, a final link for 2010, a great summary of all investing fads and themes from 1996 to the present by Joshua Brown who has also in 2010 appeared on MyPrivateBanking in an interview.

 

The Gold Bubble & How ETFs Have Fueled It

Monday, December 20th, 2010

We have had a number of pieces on the inflated price of gold, for instance here and here. Bloomberg today runs a great story on how the world’s most popular gold ETF (SPDR) has drawn ordinary investors to buy into the precious metal:

“Globally, the 10 biggest such funds now hold a combined 2,113 metric tons of gold, more than the official reserves accumulated by every country in the world save four: the U.S., Germany, Italy and France. Their popularity has helped drive unprecedented gains for the precious metal, and some people, including analysts at Goldman Sachs Group Inc., say gold can go higher.”

But from a long-term trend gold has underperformed alsmost all other asset classes (except cash). So, don’t bet on this bubble - because “this time is different” won’t apply - at least not in the long-run…

 

Why You Should be Cautious When Your Private Banker Suggests Investing in China

Tuesday, December 14th, 2010

Over the last months we have seen an avalanche of emerging markets investment products. Especially China funds are hustled to private investors. Is this a good idea?

Evidence is mounting that a huge bubble is building up in China. A recent article in the New York Times presents the China skeptic’s case quite succinctly:

“They increased the money supply to stimulate the economy. Now land prices have jumped 20 times in some places, 100 times in others. Inflation is broad-based. Go into a supermarket. Milk is more expensive in China than it is in the U.S.”

 

The Tactical Asset Allocation Game

Thursday, December 9th, 2010

It’s this time of the year again when private banks, investment banks and wealth managers around the world send out their forecasts and “tactical” asset allocation recommendations for the coming year. And so my inbox has been flooded by Citi, BofA, UBS, Nomura and many others over the last days. As always it is hilarious how a strong consensus seems to exist as to how the future will exactly play out: Economic recovery is continuing, equities will be strong, forget (mostly) about bonds, emerging markets are continuing to be a great opportunity etc. etc. The overall conclusion seems to be: Clients should move out of bonds into equities.

Of course, there are some banks which have minor disagreements. A few even warn that the party in Emerging Markets has gone a little too far. Almost two years ago, at the peak of the global financial turmoil, MyPrivateBanking has visited in a mystery shopping experiment the biggest European Private Banks to get a investment proposal. The overwhelming majority of banks recommended not to invest in equities at all or to put only a very low portion of the portfolio into equities. Even though our mystery shopping client showed medium to high risk appetite the private bank advisers would try to talk him into an extremely low risk portfolio - exactly when the market hit rock bottom.A deadly mistake which became obvious when the market turned later in 2009.

This remains the crux of every market forecast and tactical asset allocation (others call it plainly “market timing”): banks do not know the future. They never have and they never will, just like any other market participant. The only thing they do is following a broad consensus - largely in line with the herd behavior drawing conclusions based on the (immediate) past. Therefore, tactical asset allocation usually is a sucker’s game for private banking clients: you’re either late or wrong. Our advice: Just stick to your personal asset alocation - don’t try to time the market.

 

Financial Times Quotes MyPrivateBanking on Anti-Kick-Back-Initiatives

Monday, December 6th, 2010

The Financial Times is quoting MyPrivateBanking’s research director on how kick-backs are on the (slow) retreat in Europa. Frequently, fund sponsors and other financial product providers are paying kick-backs or commissions to private banks and wealth managers when they sell their products to clients. This happens often without disclosing the commission to the private banks’ or wealth managers’ client:

But as in the UK and US, the European Commission and some national governments on the continent are laying track for more consumer and investor protection measures. “That’s a big force - not directly for fee-based consulting, but for more transparency, more disclosures, more fairness, whatever that might be,” Mr Binder says. “There are a number of regulatory initiatives right now - where banks have to disclose the ‘kickbacks’ from fund firms and fund sponsors, for example - that will have the effect at the end of day for more consulting to look like fee-based consulting.”

MyPrivateBanking has just released a report on fee-only financial advice in Germany.

 

The Age of Viral Information

Friday, December 3rd, 2010

“Information is moving from being the bedrock of market efficiency to a source of crisis. The risk for the market is not the news itself, but what news gets drilled home through so many channels that people act on it; we cannot anticipate when information might go viral and sweep the markets.”

This is Rick Bookstaber on why information is becoming a source of risk. Interesting throughout. It will be one of the critical tasks of any financial institution to monitor and, if necessary, counteract this flow of viral information. As our study on Wealth Management and Social Media has shown, most banks are not prepared at all to deal with social networks and viral information.

 
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