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Low interest rates = high multiples being applied to share prices = bad for long term investing

Today from “Margin of Safety” book by Seth Klarmann, I would like to point out this paragraph: “At times when interest rates are unusually low, however, investors are likely to find very high multiples being applied to share prices. Investors who pay these high multiples are dependent on interest rates remaining low, but no one can be certain that they will. This means that when interest rates are unusually low,…

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Why certain equities can be lower a risk proposition than certain bonds

Seth Klarman: “A common mistake institutional investors make is to allocate their assets into overly narrow categories. The portion of a portfolio that is targeted for equity investments, for example, cannot typically own bonds of bankrupt companies. Money assigned to junk-bond managers will be invested in junk bonds and nothing else, even when attractive opportunities are lacking. A municipal-bond portfolio will not usually be allowed to own taxable debt instruments….

SMI PR Index 10-year and 30-year chart – Outlook 2019 and Considerations

To help me gage where the stock market in Switzerland is currently standing I find it useful to look at the price action over the last decade, and the last three decades for context. Trade & Geopolitical Newsflow In the last days many bearish articles have been published on websites like, and the mood generally is one of great caution ahead of possible geopolitical risks like Brexit (EU-UK),…

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Gatwick Drones and the Impact on Airport Security Spending and Companies like DroneShield

Today DroneShield, an Australian company published the following comments: DroneShield’s cash receipts for the first three weeks of January 2019 were A$728,628. In other words, following the Gatwick events, in the first three weeks of the 2019 calendar year, DroneShield received approximately 50% more in cash than it did during the entire previous quarter. DroneShield believes that, due to the events at the Gatwick Airport in the UK, December was…

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Listed Swiss Property Fund List – Overview

For a client I recently compiled the following list of Swiss Property Funds; Available as XLS and Immofonds PDF for download. Name ISIN Marktkapit. In Mio. CHF * Ausschüttungs-rendite (%) Anlagefonds Agio Grundbesitz Kurs 30.04.17 UBS Swiss Sima CH0014420878 7’787.00 2.9 Gemischt 30.4 Indirekt 112 CS 1A Immo PK CH0008443035 3’959.00 3.5 Gemischt 24.9 Direkt 1500 CS Ref Siat CH0012913700 3’163.40 2.6 Wohnen 44.6 Indirekt 204.9 CS Ref Livingplus CH0031069328 2’857.00 2.4…

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UBS Results: The Headwinds and The Green Shoots

The interest rate environment is dampening the business model which relies on “net interest income” , as can clearly be seen above (marked red). Luckily for banks in general and UBS in particular,  loyal customers aren’t putting stronger pressure on fees and commissions. Own fund business schrinking and lighter customer activity are lowering commissions slight as can be seen in “net fee and commission income”. A noteworthy positive is the…

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Credit Suisse underlying business – 2Q16 results

You can’t be much else than shocked by the dramatic revenue drops. This is the unfiltered story, no PR-talk, no salesman talk, just facts and figures: Credit Suisse 2Q16 1Q16 2Q15 Down Net interest income 1’999 2’011 2’869 -30.32% Commission and fees 2’796 2’675 3’259 -14.21% Trading revenues 94 -271 498 -81.12% Other revenues 219 223 329 -33.43%     Then compare it to expenses: All small moves. Compensation and…

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Pure Play Swiss Private Bank (Julius Baer – Vontobel)

In the H1 report Julius Baer is described as a pure play private bank. That’s why I thought it may be useful for discussions to know what this business model entails. Where do the profits in a pure play private bank come from? According to my calculations ** 22% from interest income (8% at Vontobel) 38% from management and fund fees (55% at Vontobel) 16% from commission (~client trading) (12%…

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Julius Baer Structured Products & Dividend Games Very Profitable, Only in H1 Always

I find it rather interesting that dividend income from trading portfolios (CHF 180m, 121.9) and net trading losses on equity instruments (CHF 126m ; CHF 104m) only happen during the swiss dividend paying season. The profit margin between the dividend income on trading portfolios and the equity losses on trading are 15-30%. As a sidenote: withholding tax is 35%. Also: Dividends in Switzerland are mainly in H1. The dividend trading income…

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Credit Suisse credit agency ratings – near problem area?

The comparison below is interesting for short-term ratings. Credit Suisse and SocGen would lose the A1 Short Term rating with the next step. Now why is this important? Many multi-billion pension funds are forced to move their liquidity from banks that lose the A1 Short Term rating. That will mean a drain on liquidity, which in turn leads to furth problems. Also the rating impact by itself can already cost…