Download - Montreux pdf
ActActActAct ConsistentlyConsistentlyConsistentlyConsistently
Around the World in 40 Minutes
Change Your Mind!
May 2011
Page 2
HARRY MARKOWITZ
Old School
Risk:
Page 3
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
Page 4
„We take the past as model for the future. That creates a world, we feel comfortable with.“
NASSIM TALEB
Real World - Black Swans
Page 5
Real World
SourceSourceSourceSource: NZZ Online/Reuters
Page 6
Real World
SourceSourceSourceSource: Lolopedia
Page 7
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
Page 8
Real World
Page 9
• 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.
Page 10
Five Cornerstones For A Solid Wealth Allocation
Quality
Diversification
FlexibilitySolvency
Substance
Pentagramm®
Page 11
Old World: Do Not Lose Money!
New World: Protect Your Purchasing Power!
Page 12
"When the going gets tough, you have to lie"
Jean-Claude Juncker20. April 2011
You Cannot Fool All The People All The Time …
Page 13Page 13
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
Page 14
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
Page 15
The Real Reasons: Debt Projection of BIS (Deficit vs. GDP)
SourceSourceSourceSource:::: BIS, Cecchetti, Mohanty and Zampolli, 2. Februar 2010
Page 16
Future Interest Payments (in % of GDP) I
SourceSourceSourceSource:::: BIS, Cecchetti, Mohanty and Zampolli, 2. Februar 2010
Page 17
Future Interest Payments (in % of GDP) II
SourceSourceSourceSource:::: BIS, Cecchetti, Mohanty and Zampolli, 2. Februar 2010
Page 18
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
Page 19
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
Page 20
SourceSourceSourceSource:::: N24
How Do We Solve the Debt Crisis?Economic Growth?
Page 21
How Do We Solve the Debt Crisis? Government Default?
Page 22
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 �
Page 23
Who Is Stupid EnoughTo Buy Government Debt?
Page 24Page 24
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 ----
Page 25Page 25
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
Page 26
YOUR INTERNATIONALYOUR INTERNATIONALYOUR INTERNATIONALYOUR INTERNATIONAL
INSURANCE COMPANYINSURANCE COMPANYINSURANCE COMPANYINSURANCE COMPANY
… and us!
Page 27
The Crucial Factor
Page 28
Investment Strategy
Change your Mind!
Page 29
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.)
Page 30
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
Page 31
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
Page 32
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
Page 33Page 33
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
Page 34
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
Page 35
Relative Performance of MSCI Emerging Market vs. World
Source: Bloomberg, MSCI, Credit Suisse / IDCLast data point: 07.05.2011
Page 36
China Gold
SourceSourceSourceSource:::: PV
Page 37
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
Page 38
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
Page 39
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
Page 40April 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
Page 41
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
Page 42
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
Page 43
Apendix
Page 44
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
Page 45
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
Page 46
Source: Bloomberg, Datastream, Credit Suisse / IDC Last data point: 31.03.2011
BRIC: FX Reserves
Page 47
Currencies – Trade Weighted
Source: Datastream, Credit Suisse / IDC Last data point: 25.04.2011
Page 48
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.