Montreux pdf

ActActActAct ConsistentlyConsistentlyConsistentlyConsistently

Around the World in 40 Minutes

Change Your Mind!

May 2011

HARRY MARKOWITZ

Old School

Risk:

BERNARD MADOFFBERNARD MADOFFBERNARD MADOFFBERNARD MADOFF

575% oder 11,2% p.a.575% oder 11,2% p.a.575% oder 11,2% p.a.575% oder 11,2% p.a.

To good to be true! nearlynearlynearlynearly = 0= 0= 0= 0

Real ugly World

„We take the past as model for the future. That creates a world, we feel comfortable with.“

NASSIM TALEB

Real World - Black Swans

Real World

SourceSourceSourceSource: NZZ Online/Reuters

Real World

SourceSourceSourceSource: Lolopedia

2

4

6

8

10

12

14

16

18

Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11

Germany France Italy Spain Portugal Greece Ireland

%

Eurozone Government Bond Yields 10Yr

Last data point: 07.05.2011 Source: Bloomberg, Datastream, Clariden Leu / IDC

Real World

• What is risk? An investment performs worse than expected.

• What is volatility? A measure for risk, however, unfortunately only ex post.

• Often investors mean uncertainty, when they talk about risk.

• There is no way to calculate uncertainty.

Résumé

Volatility is not a measure of future risk (uncertainty). However, to avoid

volatility, investors rush into assets they regard as risk free. This bans them

from investing into more “risky” but longer term profitable assets.

Five Cornerstones For A Solid Wealth Allocation

Quality

Diversification

FlexibilitySolvency

Substance

Pentagramm®

Old World: Do Not Lose Money!

New World: Protect Your Purchasing Power!

"When the going gets tough, you have to lie"

Jean-Claude Juncker20. April 2011

You Cannot Fool All The People All The Time …

SourceSourceSourceSource:::: Flossbach von Storch, Greek Ministry of Finance

Interest burden in percent of tax income for GreeceInterest burden in percent of tax income for GreeceInterest burden in percent of tax income for GreeceInterest burden in percent of tax income for Greece

“Politicians are as unable to save money as my dog is unable to put sausages aside.“ Joseph Schumpeter

ExclExclExclExcl. . . . InterestInterestInterestInterestsubsidiessubsidiessubsidiessubsidies

MoreMoreMoreMore thatthatthatthat 100%100%100%100%

22%

110% 120% 130% 140% 150% 160% 170% 180%

4,0% 20% 22% 24% 25% 27% 29% 31% 33%

4,5% 23% 25% 27% 29% 31% 33% 35% 37%

5,0% 25% 27% 30% 32% 34% 36% 39% 41%

5,5% 28% 30% 33% 35% 38% 40% 43% 45%

6,0% 30% 33% 35% 38% 41% 44% 46% 49%

6,5% 33% 35% 38% 41% 44% 47% 50% 53%

7,0% 35% 38% 41% 45% 48% 51% 54% 57%

7,5% 38% 41% 44% 48% 51% 55% 58% 61%

Point of no Return

Explicit government debt in % of GDP

Avera

ge

inte

rest

rate

Tax burden in % of GDP 2010: Status 2012 Dangerzone

Incl. Incl. Incl. Incl. interestinterestinterestinterest subsidiessubsidiessubsidiessubsidies

SourceSourceSourceSource:::: Eurostat, from 2010 on estimated levels, Greece since 2004 preliminary data

The Real Reasons: International Competitiveness

Nominal Unit Labour Nominal Unit Labour Nominal Unit Labour Nominal Unit Labour CostsCostsCostsCosts ((((indexedindexedindexedindexed))))

95

100

105

110

115

120

125

130

135

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GermanyGermanyGermanyGermany

EurozoneEurozoneEurozoneEurozone

FranceFranceFranceFrance

GreeceGreeceGreeceGreece

SpainSpainSpainSpain

ItalyItalyItalyItaly

The Real Reasons: Debt Projection of BIS (Deficit vs. GDP)

SourceSourceSourceSource:::: BIS, Cecchetti, Mohanty and Zampolli, 2. Februar 2010

Future Interest Payments (in % of GDP) I


Future Interest Payments (in % of GDP) II


SourceSourceSourceSource:::: Credit Suisse, IDC

Indebtedness of Private HouseholdsIndebtedness of Private HouseholdsIndebtedness of Private HouseholdsIndebtedness of Private Households- in % of GDP -

Indebtedness of Private Households

33,1%

49,4%

50,4%

55,7%

58,1%

83,7%

84,1%

90,5%

96,9%

103,5%

0% 20% 40% 60% 80% 100% 120%

Italy

France

Greece

EU 12

Germany

Spain

Portugal

Ireland

USA

UK

How Do We Solve the Debt Crisis?

VON DER MAKROVON DER MAKROVON DER MAKROVON DER MAKROÖÖÖÖKONOMIE ZUR ASSET ALLOCATIONKONOMIE ZUR ASSET ALLOCATIONKONOMIE ZUR ASSET ALLOCATIONKONOMIE ZUR ASSET ALLOCATION

SourceSourceSourceSource:::: N24

How Do We Solve the Debt Crisis?Economic Growth?

How Do We Solve the Debt Crisis? Government Default?

SourceSourceSourceSource:::: Flossbach von Storch

How Do We Solve the Debt Crisis? Inflation Pyramid – an Realistic Outcome?

0%

20%

40%

60%

80%

100%

120%

DebtDebtDebtDebt reliefreliefreliefrelief via via via via inflationinflationinflationinflation on on on on thethethethe exampleexampleexampleexample of of of of thethethethe USUSUSUS

3%6%

80%

8%4% 3%

Inflation rate Inflation rate Inflation rate Inflation rate p.ap.ap.ap.a....

93% 95%

54%50% 49% 47%

Government Government Government Government debtdebtdebtdebt(% of GDP)(% of GDP)(% of GDP)(% of GDP)

time �

Who Is Stupid EnoughTo Buy Government Debt?

SourceSourceSourceSource:::: Federal Reserve, April, 13th 2011

We buy everything …

0

250

500

750

1.000

1.250

1.500

1.750

2.000

2.250

2.500

2.750

Jan 07 Mai 07 Sep 07 Jan 08 Mai 08 Sep 08 Jan 09 Mai 09 Sep 09 Jan 10 Mai 10 Sep 10 Jan 11

Mrd. US-Dollar

SecuritiesSecuritiesSecuritiesSecurities

US US US US GovGovGovGov. . . . bondsbondsbondsbonds

Credit to Credit to Credit to Credit to banksbanksbanksbanks

Agency & Agency & Agency & Agency & MortgageMortgageMortgageMortgagebackedbackedbackedbacked securitiesssecuritiesssecuritiesssecuritiess

OtherOtherOtherOther liquidityliquidityliquidityliquidity lineslineslineslines

Balance Sheet of Federal ReserveBalance Sheet of Federal ReserveBalance Sheet of Federal ReserveBalance Sheet of Federal Reserve---- As of April, 13th 2011 As of April, 13th 2011 As of April, 13th 2011 As of April, 13th 2011 ----

EUR EUR EUR EUR GovGovGovGov. . . . bondsbondsbondsbonds

SourceSourceSourceSource:::: European Central Bank, April, 15th 2011

Consolidated balance sheet of the Consolidated balance sheet of the Consolidated balance sheet of the Consolidated balance sheet of the EurosystemEurosystemEurosystemEurosystem---- As of April, 15th 2011 As of April, 15th 2011 As of April, 15th 2011 As of April, 15th 2011 ----

… us, too!

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

2.000

2.200

Jan 07 Apr 07 Aug 07 Nov 07 Feb 08 Jun 08 Sep 08 Jan 09 Apr 09 Aug 09 Nov 09 Mrz 10 Jun 10 Okt 10 Jan 11

Mrd. Euro

Gold and gold Gold and gold Gold and gold Gold and gold receivablesreceivablesreceivablesreceivables

NonNonNonNon----Euro Euro Euro Euro claimsclaimsclaimsclaims

Credit to Euro Credit to Euro Credit to Euro Credit to Euro areaareaareaarea banksbanksbanksbanks

Euro Euro Euro Euro securitiessecuritiessecuritiessecurities

OtherOtherOtherOther assetsassetsassetsassets

YOUR INTERNATIONALYOUR INTERNATIONALYOUR INTERNATIONALYOUR INTERNATIONAL

INSURANCE COMPANYINSURANCE COMPANYINSURANCE COMPANYINSURANCE COMPANY

… and us!

The Crucial Factor

Investment Strategy

Change your Mind!

History of government defaults

SourceSourceSourceSource: : : : Reinhart / Rogoff (2009): This time is different

amount of government defaults/haircuts since 1800/ independence

9

8

7

6

5

1

1

1

3

2

1

8

8

7

10

Austria / Hungary

Spain

Germany *

Portugal

Greece

France

Italy

Netherlands

India

China

Japan

Venezuela

Brasil

Mexico

Argentina

* Germany incl. Regional * Germany incl. Regional * Germany incl. Regional * Germany incl. Regional statesstatesstatesstates (Preu(Preu(Preu(Preußßßßen, etc.)en, etc.)en, etc.)en, etc.)

AgrenzungAgrenzungAgrenzungAgrenzungCostCostCostCost---- /Service/Service/Service/Service---- ----

� Solvency

� International competitivness

� Diversification of economy

� Commodities

� “Social peace”

� Stable political structures

� Property rights

� Corporate governance

Economic CriteriaEconomic CriteriaEconomic CriteriaEconomic Criteria Political FactorsPolitical FactorsPolitical FactorsPolitical Factors

Exchange rate of a county = share price of a company

Payback capability of a country Payback „will“ of a country

SourceSourceSourceSource:::: Flossbach von Storch

FvS Country Rating Systematic

SourceSourceSourceSource:::: Bloomberg

Inflation And Equity Market in Turkey

Performance of Turkish Equities during the 1990s Performance of Turkish Equities during the 1990s Performance of Turkish Equities during the 1990s Performance of Turkish Equities during the 1990s - In Turkish Lira -

CPI

Equitiesrhs

S&P 500 since 1940- Logarithmic scale -

Post-war hausse 1945 – 1966: 580% resp. 12,2% p.a.

Hausse 1982 – 2000: 1.400% resp. 16,2% p.a

Sideways movement 1966 – 1982: 9% resp. 0,5%

Sideways movementsince 2000

Page 32

SourceSourceSourceSource:::: Bloomberg, data as of April, 26th 2011

Range Trading „Works Out“ a Century Hausse

Stocks are „out“ – but what is out is seldom expensive

Quelle: Investment Company Institute

Capital flows into/ out of US investment funds in billion US-Dollar

91

-234

-9

-37

31

109

28

376

241

22

-300

-200

-100

0

100

200

300

400

2007 2008 2009 2010 YTD 2011

Stocks

Bonds

Source:Source:Source:Source: Investment Company Institute, data as of March 2011

0

10

20

30

40

50

60

Apr 01 Apr 02 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09 Apr 10 Apr 11

USA Europe Japan Switzerland

P/E ratio

Last data point: 25.04.2011Source: Datastream, Credit Suisse / IDC

P/E Ratio – US, Europe, Japan, Switzerland

Relative Performance of MSCI Emerging Market vs. World

Source: Bloomberg, MSCI, Credit Suisse / IDCLast data point: 07.05.2011

China Gold

SourceSourceSourceSource:::: PV

0

10

20

30

40

50

60

Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11

200

400

600

800

1'000

1'200

1'400

1'600

1'800

Silver price Gold price (rhs)

USD/oz. USD/oz.

Last data point: 07.05.2011 Source: Bloomberg, Credit Suisse / IDC

Gold and Silver Price

SourceSourceSourceSource:::: Flossbach & von Storch, Bloomberg, Daten per 30. September 2010

0

100

200

300

400

500

600

700

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

GoldpriceGoldpriceGoldpriceGoldprice and and and and VolumeVolumeVolumeVolume of FED Balance of FED Balance of FED Balance of FED Balance SheetSheetSheetSheet---- indexedindexedindexedindexed ----

GoldpriceGoldpriceGoldpriceGoldprice

FEDFEDFEDFED----Balance Balance Balance Balance SheetSheetSheetSheet

Gold, The Better Money

No Vola-Phobia, what you think is a safe haven could become a risky place through the debt-tsunami

What we need to see is flexibility and a radical change of investors‘thinking because nominal capital preservation might result in real asset losses

Implications for Your Investment Strategy

April 2011

Asset Allocation over time

SourceSourceSourceSource: Flossbach von Storch, last data point: 21.04.2011

Net stock exposure

Hedged portion of stock exposure

Convertibles

Bonds

Gold & Silver

Alternative Funds Cash

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Okt.

07

Jan.

08

Apr.

08

Jul.

08

Okt.

08

Jan.

09

Apr.

09

Jul.

09

Okt.

09

Jan.

10

Apr.

10

Jul.

10

Okt.

10

Jan.

11

Shield your portfolio from Inflation: Go for Real Assets!

SourceSourceSourceSource: Flossbach von Storch

50%

25%

25%

EquitiesGoldReal estates, Commodities, Currencies

Quality Stocks• Superior returns achieved by stocks versus bonds

• Primary focus on „solid as a rock“-equities

(sound companies with a price-setting power and

sustainable free cash flow)

• Real assets like stocks preserve capital from losses

caused by inflation in the long run

• Cyclical stocks are overvalued

Forget financial stocks• Unpredictable risks through Euro-crisis, loan

defaults and financial regulation

Gold is real money

Fair valued real estate• benefits from the flight into real assets

Act Consistently

• Founded 1998 in Cologne.

• Today we are one of the leading independent Asset Manager and Family Office in Germany (50 employees / 4 billion Euro AuM).

• Focused investment philosophy: Flossbach von Storch Pentagram.

• Proprietary research model (CaRat Model).

• The Company is owned by founders and members of the executive staff.

Flossbach von Storch

SourceSourceSourceSource:::: Rheinische Versorgungskassen

Apendix

The State as a robber?

Inflation pyramid Inflation pyramid Inflation pyramid Inflation pyramid –––– What is this?What is this?What is this?What is this?

• This scenario has ideal-typical character

• Assumption: The Government is enable to capture this rate of price increase

• It starts when the government induces unexpected a rapid price increase in the short run, aiming devaluation of public interest obligations

• The state devaluates the same currency, in which it has to pay off its obligations

• In fact, not a formal national bankruptcy, but a loss in assets among the population

• Condito sine qua non: Interest rate do not increase!

• One the one hand, there should be a greater control on interest and capital movements, on the other hand it will lead to additional mistrust

Redistribution of assets from the private to the public sector will enable the government to pay off its obligations

30

35

40

45

50

55

60

65

Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11

-80

-60

-40

-20

0

20

40

60

China PMI USA PMI Global Composite PMI Dow Jones UBS Commodity Index with 6-month lag (rhs)

Index level YoY change in %

Source: Bloomberg, Credit Suisse / IDC Last data point: 22.04.2011

Global LEI Indicate Some Rest for Commodity Prices

Source: Bloomberg, Datastream, Credit Suisse / IDC Last data point: 31.03.2011

BRIC: FX Reserves

Currencies – Trade Weighted

Source: Datastream, Credit Suisse / IDC Last data point: 25.04.2011

Disclaimer

Sämtliche in dieser Präsentation enthaltenen Informationen wurden von der Flossbach von Storch AG sorgfältig zusammengestellt und verarbeitet. Sie beruhen auf Quellen, die von ihr für zuverlässig erachtet werden. Dennoch übernimmt die Flossbach von Storch AG keine Haftung für die Richtigkeit und Vollständigkeit der hierin enthaltenen Informationen und haftet in keinem Fall für Schäden oder Verluste irgendwelcher Art. Ausgenommen sind Schäden, die auf vorsätzliche und grob fahrlässige Handlungen zurückgehen.

Diese Präsentation richtet sich nicht an Personen, deren Nationalität, Wohnsitz oder sonstigen Umstände den Zugang zu den darin enthaltenen Informationen aufgrund der geltenden Gesetzgebung verbieten.

Die in dieser Präsentation zum Ausdruck gebrachten Meinungen geben die Einschätzung der Flossbach von Storch AG zum Zeitpunkt der Veröffentlichung wieder und können sich ohne vorherige Ankündigung ändern. Diese Präsentation kann in die Zukunft gerichtete Aussagen enthalten. Auch wenn diese Aussagen die Ansicht und die Zukunftserwartungen der Flossbach von Storch AG widerspiegeln, können die tatsächlichen Entwicklungen und Ergebnisse erheblich von den Erwartungen abweichen.

Bitte beachten Sie ferner, dass der Wert einer Vermögensanlage sowohl steigen als auch fallen kann. Die Anleger müssen deshalb bereit und in der Lage sein, Verluste des eingesetzten Kapitals hinzunehmen. Anlageergebnisse aus der Vergangenheit lassen keine Rückschlüsse auf die zukünftige Wertentwicklung zu.

Die in dieser Präsentation enthaltenen Informationen dienen ausschließlich Ihrer Unterrichtung. Sie stellen keine Anlageberatung und keine steuerliche oder rechtliche Beratung dar. Auch ist in ihnen kein Angebot, keine Empfehlung und keine Aufforderung zum Treffen von Anlageentscheidungen jeder Art zu sehen. Insbesondere ersetzen diese Informationen nicht eine geeignete anleger- und produktbezogene Beratung. Aussagen zu steuerlichen oder rechtlichen Themen ersetzen nicht die fachliche Beratung durch einen steuerlichen oder rechtlichen Berater.

Sämtliche Urheberrechte und sonstige Rechte, Titel und Ansprüche (einschließlich Copyrights, Marken, Patente und anderer Rechte an geistigem Eigentum sowie sonstiger Rechte) an, für und aus allen Informationen dieser Präsentation unterliegen uneingeschränkt den jeweils gültigen Bestimmungen und den Besitzrechten der jeweiligen eingetragenen Eigentümer. Sie erlangen keine Rechte an dem Inhalt. Das Copyright für veröffentlichte, von der Flossbach von Storch AG selbst erstellte Inhalte bleibt allein bei der Flossbach von Storch AG. Eine Vervielfältigung oder Verwendung solcher Inhalte, ganz oder in Teilen, ist ohne schriftliche Zustimmung der Flossbach von Storch AG nicht gestattet.

Montreux pdf

Documents

Transcript of Montreux pdf