English 
Español 
Prague, September 2017
Some preliminary data to take into account: The Norwegian Government’s Sovereign Wealth Fund, with a current volume of over one trillion Euros, from 1998 to 2015 has gained an average of 5.8% p.a., then lost 14 billion in 2016, recovering in 2017 with a profit of 131 billion Euros.
Considering the dramatic indebtedness of the leading states and banks, and the political situation in the Middle East, the Russia-USA relations, and the very low interest money with high inflation potential, it is understandable that investment trends are determined by erratic markets and excessive volatility. I therefore think that the trends – which are being observed in the financial markets – can be summarized in the following points:
In the long term, the abandonment of actively managed investment funds, because only about 20% of them are better than the corresponding benchmark. Their costs are very high and they are a major business for banks and managers, without participating in the risks. This is why ETFs and other forms of passive investment are making headway at costs that can be as high as 0.2% per year.
The market is now seeking to be able to react quickly to adverse conditions. In traditional funds, the bank’s client does not have direct access to his money and the fund itself has to abide by certain investment rules required by the EU that restrict freedom of action. This means that cash positions are increasing, allowing precisely for rapid mobility.
Since people with money today have far greater financial knowledge, also thanks to the Internet, they are tending to prefer to make investment decisions themselves, if at all possible, on the advice of the bank. It is very indicative in this sense that there is a great blossoming of brokers who offer a professional platform, as is the case of Metatrader software, which uses Ironfx broker and many others. There are even banks, such as Saxo Bank, that offer an even better platform with more than 50,000 products to buy or sell from the PC or from the latest generation phones, putting them on a par with Europe’s top banks. But people that think they can make money easily using the own pc should know that around 80% such kind of trading loose money due to lack of experience and knowledge.
The consequence of these trend changes is a certain return to ‘stock picking’, to investing in indices or fixed income securities when they already have a 40% discount from their face value, provided that the debtor is of high quality. And all this tends to be done by the bank’s client, either through electronic access to the bank or in an account with a broker.
So basically there is a trend towards less confidence in the institutions, which mediate investment, because, as the German saying goes, in the end everyone cooks with water. This attitude is also caused by the state’s financial repression measures, which impose on the money markets principles that distort it deeply, to the extent of confiscating assets, as we have seen in Cyprus and about which I made a study that indicates, that the clients of highly indebted banks would do well to change it for a better one. And if there are no valid alternatives in the whole country, it is better to have the money ‘in the mattress’. Today, many specialists say and write that a bank account is nothing more than a loan.
Mistrust and uncertainty explain yet another trend: the flight of cash into tangible goods, such as real estate, fields, top-quality stocks, gold, diamonds, works of art, etc. In Prague I have friends who have bought forests, and they are surprised that the logging gives them a safe return of 6%. Others I know have bought thousands of hectares of field and farmland in Paraguay and in Slovakia, where m2 can be obtained at 0.7 Euros per m2.
