The investors' dilemma!
By Prof. Robert Anthony, Anthony & Cie
Where are we going with our investments? Is the crisis over? Has the euro reached the end of its life? Should we invest in corporate bonds? What about precious metals? These are just some of the questions regularly asked by many people. Private equity and social responsibility in investing – these key words sound great, but are they really as original as we think?
In an age of electronic cigarettes, is what we think we know the truth? At the risk of causing confusion, anyone smoking this new fashionable lifestyle accessory should perhaps consider that electronic cigarettes have higher nicotine content and it may therefore actually be better to smoke traditional cigarettes. Marketing experts cleverly conceal old ideas in new products through different packaging. Can this not also be applied to impact investment activity by singularly focusing on one aspect of an overall investment to justify its worth to mankind?
Where does this leave us with regard to the above issues? The crisis will end when governments wake up and cut excessive public spending, the press will drop its poison pens and investor confidence will be restored. We are now seeing a reduction in unemployment in the USA, which is a promising sign for recovery. The cash mountain increases as the returns on corporate debt are reduced. The European Central Bank once again cut its interest rates. Italy finally has a new government. All that remains is for France to also take that all important step of cutting expenditure, which extreme pressure from EU member states will hopefully help provoke.
The euro has some life left in it yet. Germany is in a good financial position and it seems likely Chancellor Merkel will be re-elected. The sceptics risk losing money and rightly so. The yields of corporate bonds have fallen, thereby rousing investors to look for alternatives. Big cap companies with high yields are becoming attractive. As confidence in the stock market increases prices there is a greater risk that their yields will shrink. Hedging on the downside with put options is a possibility, and could be an interesting solution for the near future. Precious metals also present a fascinating dilemma. There is constant demand from private investors. Given that supply and demand always determine price, if economies recover, their need will become less crucial outside of manufacturing. It is therefore essential that the percentage in a portfolio is carefully managed.
Private equity is always interesting, provided it is not rushed and sufficiently diversified. Investing in several companies with a proven track record and skills in the sector is always wise to mitigate risk.
Prof. Robert Anthony
Anthony & Cie
T: +33 4 93 65 32 23
Professor Robert Anthony is an independent member of GGI (Geneva Group International), which has a global alliance of independent leading law, accounting, audit, management consulting and trust firms. Within GGI, Robert Anthony chairs a practice group of "International Wealth Management, Private Equity and Estate Planning".
Professor Anthony is a Chartered Certified Accountant (UK) and Certified Financial Planner (France). He is a Professor of International Tax Law at the Thomas Jefferson School of Law in San Diego, California. He is also the Principal Partner of Anthony & Cie, an international Family Office based in France, with offices in Sophia Antipolis (near Cannes) and in Paris.