MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Archive for January, 2011

Listen Up Stock Pickers!

Friday, January 28th, 2011

Here comes the first installment of the Barron’s Roundtable. This is always one of my favorite things in the yearly investment publication calendar. It’s because the participants have often very controversial hypotheses and are strongly at odds with each other about the outlook. At the roundtable you find such controversial figures like former Goldman investment head Abby Joseph Cohen and Dr. Doom Marc Faber. So, enjoy the games…

 

Labor Unions and Wealth Managers Team Up

Thursday, January 20th, 2011

The German minister for consumer protection has announced to send under cover investigators to banks’  wealth advisors to check whether their advice is following the rules and to identify possible weak spots. This latest government measure to protect consumers comes after repeated reports of banks who are  often pushing products with heavy commissions (kick-backs) into the portfolios of their private clients.

All this has lead now to a coalition between wealth managers and the biggest German service employees union. According to reports by the SPIEGEL the union has already collected 60′000 signatures against the new measure to protect bank clients. The report is here (German only).

I think this is great: greedy bankers and leftist unions unite to keep exploiting the consumer. If only Karl Marx knew about this, he would roll over in his grave…

 

Why You Can Fool Some Investors All the Time

Wednesday, January 12th, 2011

By now we have heard all about the Facebook story and Goldman Sachs. The bank’s announcement that it is offering its private clients a chance to invest in Facebook has touched off a battle for the shares among its rich clients. The other day we had in our weekly private banking link collection a great link to Rich Bookstaber’s blog where Rich predicts that over the long-term Facebook will be marginalized for a variety of reasons most importantly because it reduces people’s personalities and disregards basic privacy rights.Whatever you may think about the future of social networks in general and Facebook in particular it seems pretty clear that right now there is a major financial hype especially about Facebook but also about a few other social media and networks which aspire to go public or at least make a buck for founders and VCs through a juicy trade sale.

Remember Yahoo, AOL or even Lycos or Altavista? Each one was a Titan of the Internet back in 1990s. Fast forward to today and Google or Facebook have taken the throne. But technologies and user behavior is changing ever faster and Internet investors should be careful with companies that are valued at $50bn, have revenues of a little more than $1bn and a net profit of around $400m. But investors are not careful. Goldman’s wealthy clients want in on the Facebook deal. At the end of the day, it’s not the investment bank who is paying if and  when the valuation will not hold up. By then the bank will long have cashed in the fees for selling private shares to investors, the IPO fees and many other charges ponied up by investors to become part of the action.

Abraham Lincoln said that you can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time. Let’s just hope that more investors will make their homework and become part of the latter group.

 

The Financial Year 2010/2011

Tuesday, January 4th, 2011

Yesterday we have posted an article on the bad predictions of bank analysts with regard to stock market forecasting. This is not really news - it has been shown over and over again that analysts are - in their great majority - not able to forecast stock market movements.If one analyst is spot-on in one year he will most likely not be able to repeat it the next.

Bank analysts  forecasts are generally in line with the trends of the immediate past. For instance, today Swiss daily NZZ carries a special section on the financial year 2010/2011 (not yet online). Most of the articles are written by bank analysts or fund managers. Headlines read “Positive Gold Prognosis for 2011″ (Credit Suisse) or “Sound Growth Opportunities of Emerging Markets” (Fidelity). Julius Bär’s Chief Investment Officer sees “few signs of bubbles in Emerging Markets - on the contrary valuations measured by P/E are 15% to 25% below the highs of the last 12 months”, etc. etc.

It is the old game of perpetuating trends from the past to the future. Yet, this is exactly what lulls investors in a feeling of false security. But trends will eventually reverse and nobody knows when. I am still waiting for a private bank’s chief invesmtent officer who admits that he has no clue about the future. This would be someone to trust.

 
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