What percentage of your investments should be offshore?

Dear Investor Challenge,

The guy running my country seems a little daft. He once said that showers cure aids, and thinks that the African continent is so large all the others can fit inside it. I’ve seen him on TV trying to pronounce a not so big number, and while my 5 year old seems to be able to do this quite well in pre-school, this guy took four attempts, and I think one of them included an eleventy.

Now I really don’t have too much of an issue with stupid people, in fact Arnold Schwarzenegger remained one of my favourite movie stars, even after he said that he thinks gay marriage should be between a man and a woman.

The bigger issue for me when dealing with the #1 man of missing marbles, is that when he stuffs up, I lose a lot of money. This is something I don’t like very much. It’s better than losing a limb to carnivorous ants of course, but only just.

I’d like to take some of my assets offshore, somewhere safe from such stupidity. How much should I invest offshore? And any tips on where?

Thanks,

Ivan Tout

I have good news for you Mr Tout, I can answer part of that question really quickly. The answer is, 99.26% of your assets should go offshore. I’ll get to where they should go later.

What each country of the world leads in

What each country of the world leads in – src: thedoghousediaries.com

Now I imagine you’ll want to know how I got to that answer, so keep reading, and I’ll try cover it.

On Tuesday night I was at an ABSA Stockbrokers event entitled “Where in the world do I invest”. What a great title, it’s a question so many people have been asking ever since the Rand moved from being a slowly sinking ship, to the ship is on fire and it’s loaded with gunpowder last December.

The presentation was given by someone with serious credentials. Steen Jakobson is the Chief Economist at Saxo bank, and also it’s Chief Investment Officer. Fortunately for those of us in the audience, he also has that dry Scandinavian humour that region is so well known for as I shall demonstrate as I re-tell the only joke he knows:

Einstein dies and goes to heaven only to be informed that his room is not yet ready. “I hope you will not mind waiting in a dormitory. We are very sorry, but it’s the best we can do and you will have to share the room with others” he is told by the doorman.

Einstein says that this is no problem at all and that there is no need to make such a great fuss. So the doorman leads him to the dorm. They enter and Albert is introduced to all of the present inhabitants. “See, Here is your first room mate. He has an IQ of 180!”
“Why that’s wonderful!” Says Albert. “We can discuss mathematics!”

“And here is your second room mate. His IQ is 150!”
“Why that’s just as wonderful!” Says Albert. “We can discuss physics!”

“And here is your third room mate. His IQ is 100!”
“Fantastic! We can discuss the latest plays at the theater!”

Just then another man moves to grab Albert’s hand and shake it. “I’m your last room mate and I’m sorry, but my IQ is only 50.”
Albert smiles back at him and says, “So, where do you think the stock market is headed?”

That was also his version of a disclaimer! A warning, not to blame him when we followed his advice and ended up having to sell body parts to pay our children’s university fees.

So what did Steen come up with using his highly educated foresight? Well there was quite a lot. Firstly, he thinks that the long term future for South Africa is strong. So strong in fact that he puts it in the top 4 countries for the next 15 years. The other three were Australia, Japan and Switzerland.

Then he said that he expects a weaker dollar by year end. His reason why was interesting. Not because all sorts of charts and analysis predicted it, or that policy changes would bring it on, but because the world needs a weaker dollar to prosper, and the world should take the path of least resistance. Apparently he thinks the world is a river.

At the end of the night I hung around to chat with him, and to listen to questions from other people. One of those was a young accountancy student who asked him for one takeaway point. Steen was most inspiring in his answer here. I don’t remember the exact words, but it went something like this: The level of  education is in direct correlation to growth in a country. He was far more inspiring than I can type, and I could see the young student thought so too. I did point out that Zimbabwe is the most educated country in Africa, to which he rightly said that it was an abnormal case.

Then I had two questions for Steen. Firstly I asked “If it’s true that fund managers can’t beat the market…” before I could finish my question he interrupted me saying “It’s undeniably true. I can mathematically prove it!”. Happy to hear that I didn’t waste my time with all those articles on why it’s idiotic to try beat the market, I continued: “If that’s the case, wouldn’t it also be the case that economists can’t predict which economy to invest in?”.

There was a little smile, after all, telling people where to put their money was what paid him bucket loads of cash and allowed him to fly business class while visiting 35 countries a year. My question basically implied that he offered no real competitive advantage to his firm, or his clients. His answer was that in most cases, that was is also true.

As a follow up, I asked if we would see the end of the fund manager in the distant future. The answer this time was no, BUT we’re likely to see the end of the large fees being charged by fund managers and that he sees a role for someone to advise people on asset allocation, rather than a stockpicker. And with that, his career was saved!

So was my theory right. Could the following statement be true?

Trying to pick which countries to invest in is as much an exercise in futility as it is trying to pick companies to beat the market. Both of which are far harder than licking your elbow.

When you’re finished trying to lick your elbow, let’s look at the evidence.

Experts would have us believe that we could take the economists word and invest in economies that will show the most growth. The trouble with that, is that economists don’t have a great track record. No I shouldn’t say that, they have an astonishing track record, of complete failure as this Financial Times article said in it’s headline.

The article quotes a study of the number of recessions that happened between the ’90s and 2012. In 2009, there were 49 recessions, guess how many of them were predicted by the world smartest economists? None, zilch, not one. My 93 year old grandmother has a better track record reading tea leaves.

Okay sure 2009 was a special case considering the chaos those idiot bankers put us into. So how about the 60 recessions that occurred around the world in the 90s, how many do you think they managed to predict a year in advance? No it’s not 0 this time, it’s 2. Two out of sixty, those are the kinds of marks you get when all you’ve managed to get right in the exam is your name.

To give them another chance, they checked how many recessions were predicted just 7 months before occurring. This time they did of course do better, but still only managed to predict 20 out of 60. If your doctor had the same track record you’d fire him quickly. Clearly there’s more going on in the economy that the economists can predict.

For the complete evidence, you can take a look at the full study by the IMF here.

All of that correlates with another rather smart theory. It’s called the efficient market hypothesis, and is one of the reasons I believe that fund managers are simply wasting their time, and that index funds are the way to go.

In plain English, the hypothesis simply says that everything we know is already priced into the cost of an asset, making it fairly valued, and therefore it’s impossible to buy anything undervalued, and therefore also impossible to beat the market. This would hold true for currencies, economies or company shares.

Now putting this into the country selection view: Even if you know which countries will have the highest potential future growth and profitability, how do you really know it hasn’t already been priced into their current stock prices, or currency value?

Obviously those with the highest potential future growth and profitability will have a higher price appearing expensive, while those with terrible prospects would appear cheap.

The only way to beat the market, or pick countries to outperform the average, would be to be able to predict the future. Otherwise, and studies have proven this, it’s all down to luck, or taking far higher risks than you intended to.

Rather than trying to chase out-performance and likely end up worse off, all you need to do is buy the average. Money is going to flow to chase performance in any case, and that will render all your predictions about where to invest utterly useless.

And that brings me back to the title of the post. What percentage of your assets should be offshore.

To simply buy the average, ie to invest in the WHOLE world, a market capitalisation weighted index is the way to go. Take a look atthe FTSE All-World Index for example. This index is a breakdown of pretty much all of the world’s markets, developed and developing.

James Bond post brexit

James Bond post brexit

It has the greatest holding, in the largest market, the USA (52.8%), that’s followed by Japan (8.4%), the UK (6.8%), a bunch of European markets, and on and on all the way down to Pakistan, where it holds just 0.01%. South Africa is in there too, at 0.74% split up between 81 companies listed on the JSE.

In terms of companies, Apple has the highest percentage at 1.53%. Facebook is in there too, as is Amazon, Johnson and Johnson, AT&T, Microsoft, General electric and literally many thousands more.

To me, an all world fund is a fund you can literally hold forever. You don’t need to worry about companies crashing, or countries doing a Venezuela on you.

So which are the actual funds you could invest in to diversify throughout the world?

On the JSE you might be tempted to consider the DBXWD ETF, but I’d recommend you don’t, for two reasons. Firstly it charges 0.68% in fees per year, and for an ETF that’s a lot, but more importantly, avoid it because you’re going to pay far more capital gains tax (CGT) than you really should.

This deserves a full article on it’s own, but to be brief, capital gains tax isn’t really capital gains tax, it’s mostly inflation taxing with a little capital gains on top. Investing in Rand means you will pay far more capital gains than someone who invests in Dollars or Pounds for example. A huge amount more, there is no upper limit. You could in effect be paying an infinite % of capital gains tax, or even pay CGT on a loss. A better idea would be to invest in a currency that has lower levels of inflation, I chose the Dollar, just to give myself the maximum choice in funds.

So here is my criteria in picking a world fund:

  1. It must be low cost.
  2. It must be based OUTSIDE of the USA, otherwise if you hold more than $60 000 and you die, the US tax man will collect far too much of your money. This rules out the US based and most recommended VT which costs just 0.14%.
  3. It must cover the whole world, not just developed markets but developing too. This rules out IWDA at a cost of 0.2%.
  4. It must be fully replicated, ie. own all the shares in the index, and not just a representation.
  5. It must own actual shares, and not futures or derivatives.

All this led me to a fund called VWRD, or VWRL if you’d prefer to invest in Pounds rather than Dollars. It tracks the FTSE index I linked to above fully, holds actual shares, is based in Ireland and costs just 0.25%. I’m buying this through my US brokerage account, but any international broker should have access to it. I think of it as a buy and forget holding, something I’ll never need to sell. It’s a fund managed by Vanguard too, the only investment company that acts in the best interests of it customers rather than itself.

Do you have any offshore investments?

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*Disclaimer, the views above are my opinions. Some people believe you should have 50% of your investments in the country you plan on retiring in, others believe you should try to predict which countries will achieve the best results. Take a look at all the research available and then make up your own mind.

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  • brian whistler

    Patrick, i love your articles, makes me smile..eg.“If that’s the case, wouldn’t it also be the case that economists can’t predict which economy to invest in?”…how to make friends and influence people : )
    seriously though your articles cut through the crap.thanks

  • Thanks Brian, glad to hear it 🙂

    Yeah when the crap costs you money, it just has to go!

  • Erwin Kuschke

    Hi Patrick – once again a very interesting article. Thx for sharing.
    in point nr 2 you mentioned that “it has to be outside the USA”. With this i assume you mean the broker account?
    makes sense though – to select a country/broker that wont cost your family an arm and a leg should you pass away. On that note – is there any special indications in your will that needs to be done in order to allow the broker to move the account over to one of your family members after passing away?

  • You’d make a great editor Erwin! The broker account can be anywhere, but the fund you buy must be based outside the US. My broker is American, but I buy a fund based in Ireland, so I’m ok.

    I plan to indicate in my will that holdings should not be liquidated but the account transferred into my beneficiary’s name. If that’s not possible, then the holdings should be transferred into a brokerage account opened by my beneficiaries.

  • Thanks, very interesting read. I went to the equivalent event here in Centurion. Did you also receive the Money Fountain Book? My thoughts on it – http://www.stealthywealth.co.za/2016/07/the-money-fountain.html

  • Nope, I got an ABSA stress ball, or stress square in this case. My dog loves it, and all his stress is gone too 😉

  • marlin178

    Great article,
    Would you be able to give us an idiots guide as to where to begin. Ie: where to find a reputable broker and what would need to be done in terms of SARS etc

  • marlin178

    Great article!
    I’m currently invested in DBX World- really concerned about the CGT and fees.

    Would you be able to give us an idiots guide (for normal residents living in SA) as to where to begin investing with VWRD or VWRL?. Ie: where to find a reputable broker (interactivebrokers.com – I think?) and what would need to be done in terms of SARS etc

  • Thanks Marlin. I’m busy with a guide on how to do it, bit for now the quick version would be:
    -Open a foreign bank account if you can
    -Open an interactive brokers account
    -Go to exchange4free and ask them to help you move the cash out. They’ll tell you all the sars requirements, and handle it for you. For under R1m it’s very quick, for over it takes a week or two.

    If you can’t open the foreign bank account you could use one of the local brokers who have foreign brokerage accounts like saxo bank or absa world trader, and have exchange4free transfer into that account for you. One day when you have a foreign account you can always just transfer your holdings to the likes of interactive. I’d recommend you do, as ABSA and SAXO charge an annual custody fee of 0.1%.

  • marlin178

    Hey,
    Thanks for this…

    Opening a foreign bank account seems possible (http://www.us.hsbc.com/1/2/home/personal-banking/global-banking/open-account# ) – Would this work?

    It seems that if you pay a once off fee of $200 to open the account mentioned in the link, it will work out cheaper than paying the annual custody fee.

    Big concern is that I’m essentially entrusting a company like exchange4free with my money- should I be worried?

  • I was looking at keytrade bank in Belgium for bank account and brokerage, but the bank card would only work in Europe, so it was scrapped from my list. The big benefit of the foreign account it to withdraw funds/dividends with lower costs it’s needed. I’ll look at the HSBC link you listed.

    If the $200 vanishes that’s not great, but you’re likely right, once off costs will almost always work out cheaper than annual costs, especially if you end up with a large holding. I wouldn’t go anywhere near a broker with a custody fee personally.

    As for trusting exchange4free, I’ve already moved a million with them successfully. On Friday I’m expecting a few more millions to arrive in my US account. Trust me, if it’s not there by early next week at the latest I’ll be dedicating this whole site, and the forum to that fact!

  • marlin178

    Thanks once again..
    My hunt for banks who would be willing to allow me to open up an foreign bank account from SA continues.
    If you have any luck, please do let me know.

  • marlin178

    Hi Patrick,
    Been doing some research over the past few days in terms of opening a foreign bank account yet not having much luck.
    Would one be able to use FNB’s Global Account (https://www.fnb.co.za/forex/investments/global-accounts.html) and then transfer funds from this account to Interactive Brokers?

  • MoneyChief

    You say this: “Investing in Rand means you will pay far more capital gains than someone who invests in Dollars or Pounds for example.” I am not sure this is accurate. If you are resident in South Africa, then surely you have to pay capital gains here in South Africa and you will also have to calculate your gains in Rands. The gains will look bigger in Rands than in GBP, and in fact, they will look very similar to the gains seen with DBXWD ETF. All DBXWD is, is all world converted into Rands, which you have to do anyway…

  • I’ve done the calculations, just haven’t written the article yet. If you convert your gains to rand after working out ask the growth they add up to nearly double if you’d interested in rand.

    If you send me your email I’ll send you my excel, but over a 40 year period matching inflation you’d lose +- 7℅ in dollars to CGT but double that in rand.

  • Bevan Jones

    If you don’t mind the near constant marketing attempts then you should check out Sovereign Man dot com. He gives some pretty sound advice in general on offshoring, e.g. go for Hong Kong or Sing banks instead of US and European banks and stocks. He’s big on the whole debt collapse thing i.e. that the US is technically bankrupt etc. Having spoken with some old FX traders, the guys who remember trading DEM etc., they all reckon the EUR is a walking dead currency. Interesting when FX guys punt physical gold, Swiss CH, Sing USD etc. They also quite bullish on Renminbi and commodity currencies such as ZAR over the long term, but be prepared to ride out the noise in next couple of years. Really long term, Africa should be the engine of world growth i.e. this is where the future people will be, assuming they don’t all emigrate. Water and productive land, either for food (things go well) or to hide away (things go badly for world economy) is also probably going to be a great investment, or at least keep you safe from the penniless and starving masses.

  • Thanks Bevan, I’ll check it out. I have always wondered why governments seem to be able to spend more than they earn year in and year out. I plan on living in Europe one day, so a Euro collapse would suit me quite nicely 🙂

    I agree with your views on Africa, and a few of the countries seem to have fantastic growth. I even have faith in the ZAR long term, but the short to medium is what worries me. I took my cash out at R14.30, which I was very happy with at the time. I was a little less happy a month later when it hit R13.30, but if I could tell the future I’d be writing this from my yacht in between exploring the south pacific islands!

  • JCM

    Hey Marlin,

    Did you get info on that option?

  • marlin178

    Hi,

    I landed up going through FNB Forex after opening up a SAXO account..

  • JCM

    Hi,

    I’ve had a look at that option as well. What did you decide on investing and which exchange?

  • kumbirai

    I use the SAXO Bank account too. They don’t charge any custody fees. I have tried to look for other international brokerage account without any success. Not sure why one needs a foreign bank account unless you planning to liquidating your investments anytime soon. You can just keep your money in the brokerage account. I buy ETFs on NYSE and my personal favorite for equity exposure is the Vanguard Total Stock Market ETF (VTI)

  • JCM

    Thanks for the reply. I guess for us plebs that can’t open international bank accounts SAXO might be the only ‘reasonable’ option, even though it would have been nice to be able to choose a stock broker that has the lowest fees compared to others. I’ll probably end up going this route soon as well.

  • alain

    Patrick, I live in Belgium, and have been a customer of Keytrade bank since 2000. Utterly happy with them. Their Maestro debit card is valid for EU and neighboring countries (including Russia and many North Africa countries or Turkey, the list is really long). But for only 25 euro per year, you can get yourself a VISA card through Keytrade bank, that is directly linked to your account at Keytrade bank. For another 45 Euro per year, you can get an Amex card that is also directly linked to your Keytrade bank account. The VISA credit card allows 2500 euro per month cash withdrawal or payments (caped and limited, unless you ask for a limit raising, which I won’t do for security reasons, when the card is stolen or identity theft happens). The basic Amex credit card allows unlimited card payments and 600 euro per week cash withdrawals at any ATM worldwide, 2% fee for cash withdrawals. I used both in Russia, Qatar and in Turkey, worked perfectly fine. Keytrade bank has a brokerage division in Switzerland, that allows you to trade outside the EU regulatory environment, or move your savings from Belgium to Switzerland or split it in between the two. Keytrade bank has been bought end past year by a very solid French cooperative bank worth 110 Billion Euro and with a high Tier1 cash reserve ratio, so Keytrade bank is now really on very solid ground, which can’t be said for many EU banks. And they pay you 5 cents for every cash transaction done digitally through their platform, which for me represent a small 15 euro per year bonus on a totally charge free cash, savings and brokerage account. If you want more help or details, ping me on my private email [email protected] Otherwise, keep looking around, while trying to avoid the sharks out there.

  • Wine Twat

    That’s an ETF. It could disappear overnight, completely defeats the purpose.

  • Joe

    Two questions:
    1. I thought the $60k limit applied whether your money was in the US regardless of what it was invested in?
    2. Who do you use to get your dividend tax rate back to 15% from the 30% in the US, or does the broker do it for you on a W8-BEN?

  • Hi Joe:
    1) It’s where the funds are domiciled that matters, not where the account is held. By buying VWRD you’re effectively putting your money into Ireland, not the US.
    2) You don’t need to, because the fund is domiciled in Ireland, and Ireland has a tax treaty with the US, only 15% tax is taken off the US holdings.

  • Thanks for that Alain, any idea if they’ll allow South Africans to open an account remotely? Thanks for the email too, I might send you a few more detailed questions there.

  • I’m not sure I’m following, could you explain a bit more here.

  • alain

    they won’t open accounts for US passport holders, that I am certain of, given the mountain of paperwork required to comply with the US FATCA regulations. Have no idea if S.A. passport holders form any issue.
    Keytrade bank (KB) is located in Brussels, and now has 200 000 plus clients, many from all over Europe and elsewhere, that are working for the E.U. bureaucracy, or international institutions like NATO or UN or one of the many big multinational corporation head offices for Europe, that fills up the Brussels territory. These profiles are their main targets. These foreign people require a local Belgian account for daily activities, but that also allows international money wiring without any fuss, which KB allows with ease.
    KB has SEPA systems in place, so if your local SA based bank is also SEPA compliant (or you can find one in SA), you even could wire over money without paying any cash transfer fees, since that is how things are done over here for transfer of cash in between EU countries and a bit farther away when you are SEPA compliant. That is why I would also open a KB brokers account in Switzerland, if things can be done in Belgium, since you then can wire money at zero fee cost between Belgium and Switzerland, to have some investment and cash outside the EU area, in Swiss Franc e.g. . Things are becoming very cheap, when you use the appropriate channels….
    Anyway, KB are selling themselves as a pure internet banking operation, they aren’t one of those big behemoths banks with an office around every corner in Belgium. In fact, to allow zero charging on any not special banking activities you do over their internet banking site, they have to keep their own cost base very effective and thus extremely low and lean. For that they automatize everything, and only have one central banking office located in Brussels. If I need to see them face to face, I have to drive 120km to and 120km back, so I don’t do that often. In fact the last time I did see them face to face was 5 years ago. And I have sophisticated banking needs. That’s how good their platform and no fuss client handling is…
    Now, how do you then do business with them ? Simple. They have a sub directory somewhere on their site (see links here under), where you can find all sorts of documents to open accounts or demand other stuff, in English, French and Dutch. Print them out and fill them in, send it by scanned-in email attachment and postal mail, and wait for their quick email replies or postal mail reactions. If you have other queries later on, simply enter the question in your private secure contact box window to be found in your personal bank account page, and you get an answer the same day or the next day latest on the personal email address that you linked to your bank account page at KB, be it a gmail or hotmail email account or something to be found in SA only.
    I use a secure email account that can’t be hacked, for such bank queries email replies reception and personal very private email handling. I have opened one at http://www.latmail.eu, cost me 60 euro per year, but it is a safe (encrypted) and secured email account with two factor authentication, so that hackers or company computers with keylogging spyware can’t access my personal email box behind my back, and read it, since they haven’t the required hardware token that generates a once to be used second login password, to be able to access my personal email account content.
    Want first to enquire if opening an account at KB is possible? Ping them on their general ” [email protected] ” or something like that email address, see their website. They themselves prefer to work in a pure digital way as much as possible, but require to also receive eventual official certified documents by postal mail sent to them. They are very square with all those official things, EU regulations obliging.
    Once the account is opened, you can access it through your internet connection wherever you are on this ball of dirt called earth, your computer or smartphone is to be used to enter your personal KB page, by entering your login account number on KB’s general web page found on the right top side, then being transfer to a second page to enter typing a personal first password that must be very complicated, and then clicking on the button requesting the send out of an SMS with an once to be used second login confirmation code, to be received on your mobile phone. This procedure is to be used until you receive by postal mail your hardware second login code generator on the postal address that was used to open your banking account. This hardware code generator then will have to be used every time you want to log into your accounts, since after reception of this USB sized stick you start to pay for any sent mobile phone SMS code that you request to enter your account.
    You therefore always have two possibilities to access your KB banking accounts, either by mobile phone SMS, or through a USB sized hardware token generating random access codes (two-factor authentication) that you can wear in your jeans pocket or attached to your car key ring (as I do).
    If I was you, I would simply send them a proper short email in Oxford English, with a copy of your passport or any official identification document put in attachment (to prove your really mean business), asking them if they accept SA based residents as new clients, thus a potential client not residing in the EU area, and if yes, what procedure and what documents needs to be filled in to get stuff started.
    Saying in your email that you intent to wire over a relevant amount of cash once the account is active, and afterward also regularly increase this amount as a very long term client that want to also trade and invest on various stock exchanges, wouldn’t hurt to get a positive reaction from KB.
    You eventually can mention my name as another foot in the door, Alain Verbeke, 8511 Aalbeke. They often ask for referrals, and that is how you can smooth things over. Simply say the truth, mention in your email your investment blog name address , say that I am reading it, and that’s how we are in contact and talking about this KB stuff, and that’s how you got the intel on KB.
    They love to get new stock exchange profile clients, since they then can make a bit more money with your investment activities, than just having to manage the payments of your VISA credit card groceries purchases. And by the way, if you use your automatically attributed VISA card at least 12 times per year, they forfeit on the 25 euro renewal fee, and you then find yourself with a free VISA credit card from year two on, in your wallet. Add to that another Amex credit card for 45 euro per year, and you have access to unlimited global payment possibilities, and up to 5000 euro (=USD) per month global ATM cash withdrawal access (2% fee), as long as yo don’t get them credit cards stolen….
    Have a nice weekend.
    P.S. check Novo Nordisk, I just bought some of it a couple of weeks ago, 3.8% dividend, 18 billion in cash on their balance sheets, 1billion in short term debt, zero long term debt, worldwide market leader in diabetes care, the stock got a 40% haircut in 2016 due to USA FDA cost control reasons (the market over-reacted), and linked reduction in sales growth figures from 10% to 5% long term, message issued in 2016 after this FDA change of approach. They still make a 30% NET profit per sale and have a ROE above 70%, so it’s not that things are bad, they simply won’t stop selling insulin, but the hard growth is now much slower. It is still a proper company flush with cash, and a strong moat that is active in a market with few competitors, where it is the largest one. Go to Morningstar to check the figures. And by the way, Novo Nordisk started a 4.5Billion share buyback program in November 2016, which brought the share from $30 to now $35 ….

    https://www.keytradebank.be/en/support/document-center/

    https://www.keytradebank.be/en/support/faq/

    https://www.keytradebank.be/en/about-security/

  • alain

    ” The only way to beat the market, or pick countries to outperform the average, would be to be able to predict the future. Otherwise, and
    studies have proven this, it’s all down to luck, or taking far higher risks than you intended to. ”

    Not necessary. You don’t have to predict anything. And averaging or beating the global market is a lousy goal.

    Not losing money is the first goal you should have. And you obtain that by buying good stuff that is temporarily cheap.
    If you buy “the world” through an ETF, you buy the good, bad and ugly in one basket. No way to perform well. Excepted for the fund manager, everyone is losing on that one.
    I prefer to avoid the expensive ones (ugly). They are found very easily. Look at their country CAPE ratio and share price evolution. CAPE high (PE above 15, P/B price to book above 2) and share price action “top high”, means expensive market with low future prospects, unless you are preparing for a good shorting operation. An ETF with a high PE or high P/B is therefore out of the running. Allows for a quick pruning of a lot of country or sector ETF’s.
    That leaves the good and bad. Both MUST have a low CAPE value (they are thus cheap, ETF has a low PE and low P/B), and their share price thus MUST be low (or decreasing for several years) and bottoming out.
    The bad ones are the ones that got there through mismanagement or civil war (think Venezuela) and won’t be turning around soon, unless the civil war is over (Syria anyone?).
    The good ones are the ones that temporarily got themselves on the bad side of political or economic headwinds, but still have potential, because a turnaround is happening. Think Russia and Brazil for commodity price collapse and India with their communist prime minister, before Modi got elected.
    I invested in the “RBL” eft (Russia) some months ago, now double digit up (20% plus) and receiving a 5% net yearly dividend as a plus, while not doing anything with it but look at drying paint.

    Brazil I missed, up 50% since the start of the removal of their corrupt president.

    India I missed, up 70% since their bottom of past year, after the arrival of Modi.

    Won’t have obtained that result with a world index containing Egypt and Pakistan basket cases or a lot of now supremely expensive USA and Europe and Japan holdings (USA => CAPE above 22 – only in 1929 and 1987 and 1999 was it higher)…
    In other words, hunt for cheap assets (PE<10 and P/B price to book < 1) and look what's inside the ETF to avoid garbage, and if the reason for the collapse (oil price collapse + USA sanctions turning around for Russia) are changing, simply buy and hold until the reversal to the mean does it's work, before closing the position, a few years later, with a more than decent profit.
    By then the world will have continued to evolve, and some other expensive market will either have gone through a stock market crash or other nasty event and thus become very cheap, and the chase for another cheap country etf asset therefore can be closed rapidly, if the reasons for the collapse aren't there anymore, or won't be there anymore soon.

    Yeah, that means filtering through 50 plus existing country ETF's once a month or two, then making a shortlist of possible candidates from their chart evolution, and deciding after a thorough screening of the local country situation and valuation ratios (PE and P/B are low ?) to find reasons for positivism, to then buy a first smaller amount in that cheap ETF and move on from there, or do nothing, as often is the best move.
    It is much more work than simply putting it all into a world index, but it will probably means you will get far better results too, since not everyone is performing at its best all the time, and your world average will be dragged down by the losers that are always present in your all encompassing portfolio.

    After all, money flows change rapidly, moving from the expensive areas to the cheap ones, (communicating vessels) and you won't capture the profits of those flows if you keep invested all over the place….

  • Wine Twat

    Your broker is mandated by law to use limit orders to contain losses “manage risk”. Volatile markets create gaps between ETF prices and their net asset value. Eg. when tracking assets that are difficult to price such as scarcely traded stocks (that can’t be sold quickly without putting pressure on the price), the position of the ETF lags behind the market. HFT traders that are allowed to trade on pricing that is not public (a loophole slipped through under the guise of preventing “spooking the market”) that they exploit to trigger “flash crashes” that close out all the small fry they like. It’s not as bad as what they do with CFD’s, but it’s close. Rather stick to mutual funds if you don’t want to get too close to the Wall Street Casino – because that’s what it is, really, think about it: no company can benefit off a price movement that doesn’t at least last a few quarters, so any trades shorter than that is just a gambling game and information war against other Wall Street losers with nothing better to do and too impatient to wait for real results, invented by them for their own entertainment, and ruled by those with the longest fingers and smoothest lies and best contacts. If you’re not one of them it’s just random and the odds are stacked against you. Let’s not talk about rigged inflation “figures”… how much can your $1000 really buy in your own personal experience, as compared to a few years ago? (Consider economies of scale and how much cheaper manufacturing has become… and where do we see the value? Why doesn’t purchasing power match CPI?) The markets may well continue going up artificially kept from hyperinflation… the thing most immune to rigging is the simplest non-anonymous cryptocurrencies, watching them will tell you more about the rest than about them per se.

  • Wine Twat

    Well said. Buying a world fund right now is channeling free money to a lot of cheats who aren’t going to give it back, drowning out the real value.

  • alain

    i don’t intend to buy crypto currrencies any day for the long term. I might trade a bit of bitcoin. That is all. I am not bullish on cryptos.
    I read somewhere that working quantum computer technology is already being tested in some labs (in Canada they have one very complex looking contraption that now behaves as a quantum computer).
    Some mathematical experts in that field showed that once they become operational on the consumer market, Bitcoin itself will be wiped out in a minute or two, because the chain link is not encrypted with a sufficiently complex algorithm, and each bitcoin can and will be hacked in around a millisecond by the first owner of such a quantum computer.
    The owner of the first marketable quantum computer will simply be able to break the chain link of the 21 million bitcoins out there one by one, and change ownership to his name, before going on a buying spree involving a lot of expensive stuff, that then can be resold on “ebay”, or traded for gold or platinum, before vanishing into the night.

    There are now over 700 crypto currencies available, which one of them will become the 800-pound gorilla ? Everyone and his brother can start a internet based “corporation”, issue some crypto currency, sell it to gullible fucks through an “exchange” (there are 7 billion plus fucks out there on this planet) and rake in the money, before going bust. I think Bitcoin is the granddaddy and will be the 800-pound gorilla, but as I said, technology geeks have already demonstrated that it will be hacked once quantum computers become available.
    Which one will have a sufficiently complex algorithm to not be hackable by future new technology? I am old enough to have witnessed the evolution from telex to fax to computers to internet to smartphone. A current cheap smartphone is about a million times more powerful than my first very expensive Comodore 64 computer eons ago (30 years ago)….
    And who says that government won’t find a way to counter their monopoly on money issuing, that serves as a foundation for their power base, us being slaves to their money printing machines (uuh, they now simply digitally issue money, it takes 2 second to create a trillion USD, the time required to type the 12 zeros in a computer). Unless you own a big farm and decide to live in isolation like in the stone age, good luck with that.
    China yesterday ordered all its banks to block any yuan digital cash transfer to any bitcoin purchase entity, the result of that action is that bitcoin collapsed from over $1160 to less than $900 in half an hour or so. Venezuelans are the one who made sure it didn’t collapse further down to $600 for the rest of the day. It is as simple as that to kill the golden goose.

    If they all 194 govmints decide in unison on the same approach, crypto currency holders are toast. And they are doing that right now, since they are preparing to issue their own cash with a chain link system attached to it, so that they can start to follow where their own money goes, it then will be end of story concerning the anonymous purchases and dicey money handling allowed by Bitcoin and fellows. We are still a long way from that situation, but when those fucks in the govmint feel threatened, they won’t hesitate to kill whomever and whatever forms a threat to their power monopoly. Psychopaths act like that. Just ask Roosevelt, when he outlawed gold purchase and ownership in the USA in 1932, before halving its value in USD.
    But as I said, wealth creation will continue, and cash paper or crypto-currencies are only a way to facilitate the exchange of wealth in between two entities who don’t trust each other or don’t know each other, and as such there is no limit to what constitute money and the true value found in it.
    That is why I try to invest in sound businesses, that is where the wealth is created and to be found, and their value is represented in units of paper or units of digital stuff, that can be transfer to other stuff that you may need down the road, until you die.
    And once your die, it is game over for the “money chase”, since you can’t take it with you, unless you ask to have your crypto currencies buried with you six feet under a pile of sand, or handed over to your eventual offsprings…
    Which leads me to my main point: investing in a safe manner is difficult but doable, and your short life should not be wasted on this sole pursuit, since you only live once. Keep your eyes peeled, avoid the many many traps, stay up to date, think for yourself, and still try to enjoy life, but make sure you keep score by increasing your wealth in parallel with the enjoying of life, otherwise you risk to end up old, sick, broke and living under a bridge in full winter, with an empty bottle of wine next to you.
    Have a nice day.

  • Wine Twat

    While you’re quite clued up on finances, you really need a crash course on computing. Open source / software freedom means anyone can read, modify, understand and hack the code, and this has enabled- and become the cornerstone of all tech you use today. Hobbyists and doctorate students create software that few corporates can afford (or have the vision) to develop, and those corporations use that software to bring you products. There are no exceptions, everything from your garden water sensor to your iPhone uses public domain “open source” software. Cryptocurrency is no exception, and 1000s of clones have sprung up.

    If you head over to coinmarketcap you will see that Bitcoin is already the 1000 pound gorilla and gold standard of crytocurrencies, with its nearest competitors lagging 90% in market cap. Yes, things can change rapidly, but even that can be provided for in the algorithm that makes it possible.

    Not only that, suppose someone cracks SHA encryption with a quantum computer (most experts argue that it’s NOT possible) but suppose they do – Bitcoin still operates on consensus. If the consensus is clear that it’s being hacked and that it’s insecure, the algorithm will be adapted and the blockchain rolled back. For examples of how this will play you, you can take your pick of 10 competing cryptocurrencies that got hacked with more trivial hacks, the ETH vs ETC saga is probably most prominent.

    Long story short, yes, Fiat is awesome.

    The only thing is, until now there has not been a hedge against fiat, and now there is.

    Yes, many people on the internet and especially in cryptocurrency are naive and immature, but don’t be deceived, they come from another world that works by different rules and they’re bringing their expertise to the world of finance, which has fundamentally been unchanged for centuries.

    Can you attach a $1m in cash to a postcard and expect it to arrive at a destination, without having to jump through regulatory hoops and kissing regulatory butt? With Bitcoin you can attach it to an email, you can even make it self destruct if the person reading the postcard doesn’t read it with the right goggles, if he agrees.

    Bitcoin is just one flavour, but it’s already the gold standard in cryptocurrency. It’s operated and controlled by over a million independent individuals and its future is decided by what code those individuals choose to run on their hardware – ultimately its future and value and utility is decided by how easy it is to influence this global multiracial multinational diaspora of self-elected technocrats.

    Compare that to treasuries and governments… it’s not better or worse, it’s just an alternative, and a good hedge against global hegemony. Not only that, cryptocurrencies have given a whole generation of technology savvy entrepeneurs and software developers toy money with which they have started to first understand how money came about, and have proceeded to reinvent it, many of them at an age where you barely even knew how to do calculus. If you have not recognized the significance of this revolution in finance, or don’t soon, you will just be the worker left in the coal mine trading stock tips, in the wake of a new status quo that you didn’t see coming because you had no concept of it and couldn’t recognize it because nobody took the time to enlighten you.

    Say you want to move $200m out of your country, bypassing your
    government? How do you do it? The only way I know of, is to buy $150m
    worth of computers, burn $50m worth of electricity, and so generate
    $200m+ worth of Bitcoin, that you can spend anywhere on the planet without having to bend over.

    Sure,
    you can run an elaborate multinational corporation, so why bother with
    Bitcoin? Because you want a hedge against the status quo. You want a
    hedge against nuclear holocaust, global economic collapse. Do you need it? No, you don’t. But for the first time in history, you can have it if you like. How many eggs is reasonable to put in this basket? Why do people hold gold? You can’t email gold without having to trust a third party. You can email bitcoin without having to trust anyone but anyone who understands how to keep a cryptographic key safe on a computer, as well as a million random individuals who all undertands what’s good for them.

  • Wine Twat

    You’re well endowed with common sense, so consider this:

    Open source means anyone can read its most intimate secrets and hack the code and improve it and as you have noticed, no need for fancy hardware and teams of dissasemblers and reverse engineeers, it’s all out there in the open, as democratized and accessible as possible… and almost 1000 different projects have tried to improve it…. Guess what? A quick look at coinmarketcap shows that Bitcoin is already the gold standard amongst cryptocurrencies, having over 80% of the total market cap.

    To see how a major hack will go down, you can look at many examples – most notable, The DAO – and the resulting ETH and ETC fork. Has it affected its value? Barely. You have to ask yourself why… Bitcoin is run by over 1 000 000 independent individuals, and the only consensus is in the actual code they run. There quite simply is nothing more democratized, decentralized and more trustworthy. If a hack happens, the community will do what is best for itself, and fork over to a more secure algorithm. They will do this if they even suspect a hack of being possible. You don’t have to wonder about if they’ll do it or not, you just have to watch the price and public metrics to see what’s happening… if it gets hacked, funds will naturally be unable to move except in speculative and derivatives markets.

    While groups of countries or banks often issue flashy press releases to the contrary, I do not recall ever seeing more than 20 countries agreeing to collaborate on anything in practice, so I don’t know how you will be able to keep a bunch of banks from hedging themselves against the fabricated financials of their hostile peers, and cryptocurrency is the most lucrative and user friendly tool at their disposal. It is already happening and the house of cards is coming down one whale at a time. Banks who were supposed to ensure our prosperity by investing in accountable supply chains giving us more value for money, have failed us by only investing in tumorous and parasitic groups of companies. The party is coming to an end, and the people are holding them accountable.

    Cryptocurrencies have given toy money to a whole generation of techies and they have played with it, figured out how it works, and have improved and revolutionized money. Just 1% of Gold moving to Bitcoin sees the Bitcoin price at $4000. Cryptocurrencies will be around as long as we have solar power, radio waves and computer chips, and that makes it a lot more valuable and useful than gold.

  • alain

    Hello Wine,

    Hope you are well. Read your statements. Let’s just agree that we are not on the same page and let us move on, shall we ? You do what you want with your savings, and I am also doing my own personal thing.

    You just don’t understand the disruptive power of quantum computers. A current desktop computer model is the equivalent to going to the moon and back in a week. The most powerful current mainframe supercomputer is now the equivalent to going to Mars and back in a week. The first quantum computer will be able to go to the next galaxy and back in a week.

    As I stated, a quantum computer, once it is available, will be able to crack your personal private bitcoin key and change ownership without anyone being able to stop it, even if “they” improve the algorithms manifold. This key is private and nobody know it except you, even when using open source software and everything in the chain link being public. Just like someone can’t crack a 1024 PGP encryption key right now to open unreadable encrypted emails being sent out. Just ask the FBI who can’t read a simple Iphone5 that is now left encrypted or Snowden’s encrypted USB key containing GB’s of classified documents, unless they get the password through lateral shenanigans.

    Bitcoin, I trade it a bit using a StochRSI buy signal + chart bottoming out, and euphoric crowd mania on the web to exit it, using CFD instruments that follow Bitcoin prices like their shadow, thus not being directly involved with Bitcoin at any time. I trade Forex currencies using CFD’s on a daily basis, as an income generating hobby. The forex market is a
    $5000 Billion daily market on it’s own, mined Bitcoins today represents around $10 billion in this scope. Bitcoin and Co is peanuts in the overall scheme of things.

    As far as bitcoin is concerned, I lost all interest in long term holding, when I noticed the shenanigans that happened during the collapse of the MTGox Bitcoin exchange, where Millennials waving they expensive smartphones in front of the MTGox office doors, turned around to the present press with tears rolling along their cheeks, some stating that they
    lost $300 000 and more in the process. They got some of their bitcoins back in the form of USD paper currencies put on their bank accounts, but everyone was deeply skimmed in the recovery process. So much for a open source currency that everyone can control and follow and is so called fool proof … End of story for me.

    This will not happen with a simple shareholding of sound profitable corporations. In fact, I am laterally involved with bitcoin technology right now through several public corporations where I own some shares, where they are using the chain link technology to disrupt to status quo in various sectors, including medical record keeping, digital payment
    processing and bank lending, and database mining. That is another way to play it safe, using the disruptive edge contained in the chain link concept developed for and standing behind Bitcoin and Co crypto-currencies.

    I have lived 18 years in frontier countries, and traveled extensively. Where electricity, telephone connections and the internet were either non-existent or operating very erratically. Hyperinflation was often present locally. The best way to cope was using the available cash for daily purchase, and transform all the rest of not immediately needed local bank account cash into hard stuff (silver, gold, gasoline,food, hardware like lightbulbs, motor engine parts, furniture, lead
    bullets, food for the dobberman dogs, and so on) or switch it into foreign hard currency asap using the thriving local black markets (Belgian Frank, USD mostly). Could write a book on that survival of the fittest subject. Bitcoin and Co didn’t then exist. Managed through it just fine. As far as I am concerned that closes the chapter on crypto currencies, since you need a working infrastructure to be able to use it properly, and that certainly is the first thing to go down the drain in case of calamity or hardships like civil war or nuclear armaggedon or a first class hurricane leveling everything in it’s pathway.

    My digital money is spread over various banks with a triple A or double A rating. In various countries. In various currencies. I am as clean as can be, as far as my home govmint is concerned. I am able to move my cash as I
    want it, and do it. Have gold and cash paper stored in various locations, to be safe. Have the purchase bills and taxes paid on those purchases at home, so that they govmints leave me alone and in peace. I pay my taxes every year, so they can’t come after me. I sleep well.

    Been there, done that. As I stated earlier, I won’t waste more of my time on this Bitcoin subject, and consider it closed from my side of the ledger. I won’t bother to reply to an eventual reply from your side, since I won’t go into crypto-currencies any day. Hope you got the message, and move on.

    Good buy.

    Al

  • Wine Twat

    I agree wholeheartedly on the value of the status quo and stock holding. Cryptocurrency simply highlighted that to a whole generation of people who weren’t much interested in fintech before, so it’s all about to become even more competitive.

    There are still two things you don’t get: 1) If a quantum algorithm can be used to crack it, a quantum algorithm can and will also be used to secure it. 2) Open source takes survival of the fittest and learning from the mistakes of others to a new level.

  • alain

    ” There are still two things you don’t get: 1) If a quantum algorithm can be used to crack it, a quantum algorithm can and will also be used to secure it. 2) Open source takes survival of the fittest and learning from the mistakes of others to a new level. ”

    Yeah, tell that to the many ones who lost a fortune during the MtGox fiasco, or from the closure by the FBI of the dark website who sold marijuana and other stuff that you can’t find in your neighborhood pharmacy. Survival of the fittest is really nice if you are sitting on a pile of money and don’t care of losing it … As I said, I won’t bother with crypto currencies and you don’t need to further waste your time trying to convince me otherwise. Bye Bye.

  • Lupa

    I’ve used CurrencyFair to move quite a bit of cash from GBP to ZAR without any problems. Going from ZAR to other currencies seems to require a bit more effort in terms of getting co-operation from our local banks, but their rates are significantly better (I just compared with exchange4free) especially if you use the “choose your own rate” market option. Might not be worth the hassle for small regular deposits but the savings could be considerable for large lump sums.

  • How did you get the funds into CurrencyFair? I’ve looked at them, but couldn’t set up a foreign payment into a rand based account from FNB and calling the bank was no use at all. Could you perhaps give an example breakdown of the costs?

  • Lupa

    As I said above I was using it to move in the other direction (from GBP to ZAR) which was very easy and I got a great rate. I did try once to change some ZAR into GBP and ran into the same issue with FNB (although I foolishly didn’t talk to the forex guys, so maybe I was speaking to the wrong person, who didn’t think they could do it). However, CurrencyFair has a detailed note on the page now explaining that you must get your bank to do the transfer in ZAR and not convert (their ZAR account is held in London) – so obviously some SA banks are doing it. I’ve now changed banks and will probably try again when I want to change a large amount.

    In terms of fees they charged a flat fee of R25 and Nedbank charged R400 iirc to receive the funds from a foreign account (even though they were ZAR, ergh!). I’m not sure if that was a flat fee or a percentage, I dimly recall it being the same for a few different transactions, not sure what other banks charge for this as I haven’t done it again since changing banks. As far as I can tell CurrencyFair’s fees vary according to the currency, some exchanges don’t attract fees at all (eg: EUR to GBP).
    As I said before, it’s probably not worth it for small sums but for large ones I think it could generate a substantial saving.

  • Joe

    How did your US broker get access to the counter, my understanding is it is listed on the LSE?
    Alternatively, which US broker lets you access this, since mine only does US exchanges?

  • The broker I use (Interactive Brokers) and I imagine pretty much all of the major US brokers allow you to trade on all the major markets, which includes the LSE. You could also open a custody account with De Giro and buy it in Euros on one of the European markets for 0% in fees! My bank account is in USD, if it was Euros I’d do that.

  • Joe

    Interesting – my US account is through TDAmeritrade so they only do the US exchanges unfortunately. Would need to open a TD Direct Investing international account separately but I’m allergic to custody fees (euro 45 per quarter if not trading). All the other options I’d explored, Saxo, FNB and Webtrader all had custody fees too. So am seeing what else is available. Will look at IB and De Giro for sure – do they require offshore bank accounts, or can they be funded directly via the usual excon process on exchange4free?

  • Wine Twat

    That wasn’t hacked, that was stolen or mismanaged. It’s even easier to steal from a bank – and even easier for the bank to pretend it didn’t happen and just “issue” more cash to make up… the only real way to see how much this is happening if you’re not part of the small group of people who does this, is to watch the price of Bitcoin and other cryptocurrencies. They’re not going up because they’re getting more valuable, they’re “going up” because everything else is getting inflated… because it’s a true globally measurable scarce resource. Unlike the money that is just created from thin air by people who are really good at explaining to you how its not.

  • alain

    ” That wasn’t hacked, that was stolen or mismanaged. ”

    What’s the difference? None. You should go into poly-tics, you would do great.

  • Wine Twat

    There’s a huge difference. Yes, ultimately everything is shades of grey… but please try to be rational and reasonable. You would expect a bank to keep its gold in a vault, right? Not just in a wooden cupboard in some guy’s office. If someone stole it from the wooden cupboard – would you suddenly say that gold was worthless because people kept it in wooden cupboards The Bitcoin protocol can’t be hacked or manipulated without spending a lot more than what it costs to help process transactions for the network, that’s why it’s so valuable – it’s a lot more profitable to mine bitcoins than to use that processing power to try to steal it, that’s the key innovation. The problem is people who can’t keep their keys secure…

  • alain

    ” There’s a huge difference. Yes, ultimately everything is shades of grey… but please try to be rational and reasonable. ”

    Yawn. Done bothering me with your crypto thing ?