MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Archive for June, 2011

Should Private Investors Go for Internet IPOs?

Thursday, June 30th, 2011

Over the last 6 months or so a new vintage of Internet IPOs has generated a lot of publicity. Chinese Internet companies and social media companies are going public in droves.  LinkedIn probably being the most significant among them. In most cases the valuation of these new ventures is quite lofty and reminds of the dot-com buble that ended with a crash in 2000. Yesterday a social gaming company called Zynga has made some moves to file for an IPO soon. Social network Facebook and the e-commerce  v enture Groupon are also expected to go public soon.

Clients of private banks are often offered IPO shares or investments in so called pre-IPO vehicles. Goldman Sachs has done just this for some of his clients with Facebook shares. Some private banks can do this as they have close relationships to their investment banking divisions or venture investment organizations.This is especially the case for large, integrated players like UBS, Credit Suisse, Deutsche Bank, Goldman and others.Often these special offers are used for client retention and are used as special “goodies”.

But is it a good idea for private investors to invest in such risky new companies during or even before an IPO? MyPrivateBanking research has undertaken a thorough analysis of the most catastrophic IPOs during the dot-com buble and compares them with today’s new vintage of Internet IPOs. The result is quite shocking - it shows that almost exactly the same banks and IPO underwriters who caused the stock market crash 10 years ago are now doing the same thing all over again. The report will be online soon and will be available for download on our main website.


The New Merrill Lynch World Wealth Report

Thursday, June 23rd, 2011

Find it here. Highly recommended.


Will the US be Next to Ban Kick-backs?

Wednesday, June 15th, 2011

The initiative of the UK’s FSA (Financial Services Authority) to ban kick-backs from next year on is drawing attention all over the world. Financial Planning Magazine asks: Will the US be next to ban commission-based advisors? We hope so.


Find the Bubble

Monday, June 13th, 2011

People are wondering whether the social media hype we are witnessing is a new bubble in the making. Facebook, LinkedIn, Twitter, Groupon, Skype - you name it. Valuations seem like pie in the sky again and i-bankers are cashing in handsomely. But are there some truely objective measures to spot the bubble?  Here is a 10-point-checklist to find out about the bubble-grade of the latest stock market fad…whatever it may be.


Is Financial Education Bad for Private Investors?

Wednesday, June 8th, 2011

A recent article on MarketWatch claims that

“financial education, for some consumers, appears to increase confidence without improving ability, leading to worse decisions.”

The report goes on that it appears that investors need professional help because,

“… there are the expert skills, skills that are good to have but best left in the hands of a professional. With driver education, it’s changing brake pads; with money it’s asset allocation, risk management and security selection”

Great advice - give your wealth to a professional and join the 80% or so of actively managed portfolios that are underperforming their market benchmarks. There may be a lot wrong with personal finance education. One major reason probably being that its mostly in the hands of self-styled “experts” who are not aiming for education but who are trying to sell one or the other investment product using personal finance books and education as marketing tools.But true financial education for private investors should not be complex, difficult or confusing, and it should be definitely not done by those who have a clear conflict of interest.  It should be simple, straight-forward and independent from banks or other financial players who are following their own special interests.

Running your own portfolio is not difficult. In fact, it is quite simple - at least compared to the skills you need to drive a car: Have clear objectives, understand your risk profile and invest in simple, index-based products. But there are only very few professionals who want to teach this gospel. Probably, because the professionals won’t make a lot of money based on these simple but effective strategies.