All-time high

It’s been a while since a new blog was posted (sorry), and during that time some of the world’s stock markets have hit a series of all-time highs.

The one to get the biggest headlines is the most well-know one: the Dow Jones Industrial Average, or DJIA. It’s been consistently used as a benchmark for how stock markets are performing generally, and as its components (the companies whose stock prices are followed by it) are all large multinationals, it’s also seen as a barometer for the health (or perceived health) of the global economy.

So why the big fuss? Well, the last all-time high was 9^th October 2007 – with a value of just over 14,000 - after which it dropped 25% in the following year BEFORE Lehman Brothers collapsed, then continued falling to a low of around 6,650 – a loss of about 52% in about a year and a half.

Scary stuff, particularly as investing in this index would be considered as a “medium-risk” (more risky than government bonds or corporate bonds, but not as risky as shares in smaller companies or emerging market companies).

Of course the flip-side of this is that those who invested just after the crash would have seen a return on investment of over 100% - their investment is worth more than double what they put in – in just 4 years. Very good indeed, for what is still considered a “medium-risk” investment.

Unfortunately, for most ordinary people, it didn’t work out that way. A lot of people got scared after the crash, and either cashed in their investments or stopped paying into their regular savings investments. This is a very silly thing to do, because you lose out from the crash, but don’t benefit from the bounce back – which invariably occurs.

Inevitably, just as many people cashed in their investments after the crash (when their value was low), there will be many people who now choose to invest, now that the price is at an all-time high. People will think that it is now less risky, because things are “back to normal”.

But buying at a high price, on its own, is just as silly as selling at a low price. As a general rule, it is the incompetence (and easily predictable illogicality) of amateur investors which make it possible for professional investors to make large profits.

There are precious few people (including professionals) who are able to tell you when the best time to buy investments is – because nobody knows exactly what’s going to happen tomorrow. You never know when the price is at the lowest point, just like you never know when it’s at its highest point.

But there’s one group of people who have definitely made money over the last few years, through its highs, lows, and highs again. They’re the people who planned ahead, made a plan based on what they wanted and needed rather than what they thought the markets would do, and stuck to it.

Every month they put a little bit aside, as per their plan. Sometimes they were buying at an equivalent price of 14,000. Sometimes at an equivalent price of 6,650. Most of the time, it was at an equivalent price of somewhere in between, and it changed every month – sometimes higher than the month before, sometimes lower.

The end result is that after a few years, they’ve paid high prices and low prices and everywhere in between, but all that matters is the average price. And whether you look back 5 years, or 10 years, or 30 years: If you make a good plan, stick to it, and carry on regardless of what all the amateurs are doing, you’ll make money if you give yourself enough time.

Don’t try and pick a starting point – start as soon as you can, regardless of market prices, and put just a little bit away each month. That’s the most important bit. The second most important bit is making sure that in the final few years of your plan, you’re not risking the potential of another 50% drop in value – timing is very important on the way out.

So if there’s one key message from this post – don’t think that now is a good time to invest all your money, just because the markets are at an all-time high! Similarly, don’t think it’s a bad time either – you just don’t know.

One thing is for certain – now is definitely a good time to start saving regularly, because it’s always a good time to start saving regularly, as long as you’ve got a few years ahead of you.

It may not sound particularly exciting (because it isn’t really that exciting), but basic long-term financial planning is just as important as regularly checking the battery in your smoke alarm and remembering to wear a seatbelt (two other slightly monotonous and repetitive tasks which I find rather boring, but can have serious implications if you don’t do them).

If you’d like to look at your investment options please just get in touch, and together we’ll ensure that your wealth is at its all-time high when you need it to be, rather than at some arbitrary point in time along the way.

Free money from AXA!!

It’s true – AXA are giving away free money. Yes, of course there’s a catch – but for most readers, it’ll be a “catch” that that they already have – and in most cases a “catch” that is very good for them.

Everybody needs to save money – even billionaires. Spending it all would be most unwise. For most people, money comes in monthly, which means saving monthly is the most sensible thing to do – a little bit put aside from your salary as soon as you get it won’t be noticed or missed too badly by most people.

And AXA (just like every other company that offers these types of products & services) would like you to save with them.

There are plenty of reasons to like AXA – they’ve been around for nearly 300 years, have over 95million clients around the world, and are the world’s 25^th largest company based on revenues. We’ll forgive them for being French.

The really great news is that they’re so keen on growing their client base in Asia, they’re giving away free money to attract your business. Here’s how it works:

1. You decide how much money you want to save each month

2. You decide how long you want to save for

3. You decide what currency you want to save in

4. AXA pay you up to 125% of what you pay in during your first year as a bonus

That’s 125% on top of what you’re paying in – so if you’re saving $5,000 per month ($60,000 per year), they’ll add $75,000 to your account with them – which means that your account will have $135,000 in it after one year. And you not only get that money, you get the growth on that money too.

Does that sound too good to be true?

It’s not. We’re just very good at sourcing exceptional deals for clients. Of course there’s more terms and conditions involved, but they’re available by clicking the “AXA” link on the left, which takes you to their offer document.

This offer was launched yesterday (26^th Feb 2013) and closes on the 25^th of March 2013, so if you want your free money, you’ll have to act relatively quickly.

Please note that this product is from AXA International, not AXA Indonesia, whose products are structured significantly differently. You also won’t find this offer (or indeed this product) available from any other companies in Indonesia, as it is a Hong Kong regulated product, and AXA will only accept applications placed through companies who are licensed to provide financial advice in Hong Kong.

This offer is open to people of any nationality, and you can choose to save annually or quarterly rather than monthly if you prefer.

If it sounds good, get in touch to discuss it further.

Finally, on the subject of great investment opportunities, the absolute final day for investing into the Pilot Asia Capital bridging loan product is tomorrow (Thursday 28^th February). It’s not far off being fully subscribed, and there’s a little bit available for anybody who wants to participate at the last minutes. Full details on this are contained within previous blog entries.

Have a great week!

Is Private Equity for you?

Welcome back to the blog, hope you’re having a great lunar new year if you’re celebrating it…

It’s less of a blog and more of a notice this week – actually there are a couple of notices.

Firstly, the investment banking transaction referred to in the last blog post has crossed the $5million threshold, which means that:

a) It will be going ahead as planned, the minimum funding requirement of $3million has already been reached; and,

b) The bonus “early investor” rates are fully subscribed; the returns available are now 17.5% for those who invest $250,000 or more and 15% for those who invest less than $250,000.

The capital raising period will end on the 28^th February, so anyone who wants to invest needs to complete their application form and send the funds before this date. At the time of writing, the remaining availability is just under $4,000,000, and the minimum investment is still $10,000.

The expected redemption date is still between 6-9 months from the closing date, and the returns stated are a total return, not annualised – if redeemed in 6 months’ time, you’ll get the full 15% return on your money, not just half of it.

Secondly, we’re now regularly being approached by various companies and projects regarding their financing requirements, which are generating a lot of opportunities for investors interested in private equity and/or private debt placements.

They’re coming in all sorts of shapes and sizes, various different business sectors, with varying levels of risk and security – so if there’s something in particular that you’re interested in, or looking for, just let me know – I can either try and source a specific opportunity for you, or simply let you know personally and quickly when an opportunity comes up.

Generally speaking most of these opportunities are only available for those who have at least $500,000 to invest in a project – and often only those who have several $million - but I’m happy to keep you informed even if you’re not at that level.

So – if you’d like to invest in the aforementioned transaction, send me an email – you’ll have to move quickly. And if you’d like to know about private opportunities or have something else finance-related you’d like to know more about, just get in touch.

Have a great week!

Something for the New Year

Hello again, welcome back to the blog… I hope you had a great Christmas and New Year and are looking forward to an exciting year ahead.

We’re already excited in our office – we’re very pleased to be able to offer old and new clients the chance to participate in a one-off investment banking transaction which comes with a minimum return of 15% in less than a year. Not the sort of thing that comes along every day…

How is this possible? Well, the full details are available online (also downloadable in PDF format) by clicking the link on the left which says “minimum 15% return within one year”, but I’ll summarise them here to give you a flavour.

Investment banking transactions take a variety of forms, and in this case it relates to a financial restructure at a large Indonesian corporation, which is being handled by Pilot Asia Capital. As part of the deal, Pilot Asia Capital has the option to acquire a large plot of land (19,683,860 square metres) in West Java (Indonesia), and is seeking to raise $10,000,000 to complete the purchase.

The land is valued at $18,000,000, and negotiations with two separate interested buyers have already started – and there’s a good profit to be made from completing the purchase and selling it on, even at a heavy discount to get a quick sale.

The great thing for potential investors is that in return for providing the bridging finance for this transaction, they’ll be rewarded with a fixed return of at least 15% (higher fixed returns are available to those who get in quickly and/or invest larger amounts – the highest return is 20%), plus they’ll have the full plot of land held as security on their behalf.

So basically investors in this transaction become short term mortgage lenders, secured on property with just a 55% loan-to-value ratio.

The minimum investment amount is just $10,000, and the offer will close on the 28^th February 2013 – or before if the full amount is raised before then, which I think is quite likely in this instance.

If you happen to have a transferred UK pension (known as a QROPS or a QNUPS), you can take advantage of this offer using some of your pension fund as it’s been approved as a qualifying investment.

So what are you waiting for? Click the link on the left to read the full details, and of course get in touch if you have any further questions or would like to discuss it in more detail.

Finally, I wish you a happy, healthy, fun and wealthy 2013 J

Bali Medical Insurance Developments

If you live in Bali, this information is important and could save you a lot of money; if you don’t live in Bali, it still could be relevant for you anyway!

It’s come to our attention that a lot of Bali residents are having their Health/Medical Insurance premiums raised significantly – in some cases more than doubled.

In particular, one insurance company – Expacare – appears to be raising premiums the most, although I must stress that this is our findings based on the cases we’ve been asked to review, and I obviously don’t have the data on every Expacare client in Bali.

This shouldn’t be taken as a negative indictment on the company itself, but it is indicative of the insurance industry as a whole in terms of how it operates.

Insurance companies use a massive array of statistical data to assess their business, but they don’t all use it in the same way. So when they are approached for a quotation, they use the information at their disposal to calculate a figure which they believe will result in a profit - including, crucially, information relating to their own business.

Just like prudent management of an investment portfolio requires a well-diversified portfolio, prudent management of an insurance company requires strong diversification amongst what it insures – in the case of a health insurance company, this means people.

Similarly, if an investment portfolio or an insurance company portfolio contains underperforming assets, the manager will often want to dispose of them. Where an insurance company differs, is when its business contains assets which it doesn’t want for whatever reason (i.e. when it insures people that it doesn’t really want to insure), it can simply raise the cost of cover – either to make it profitable again, or encourage those people to seek insurance with another company.

It’s difficult to pinpoint exactly why premiums in Bali are increasing so much in some cases, but safe to say it’s because the insurance company either feels that they’ve previously priced it wrong, or more likely (with very high increases) that they’d just not rather insure that person any more.

It might be because they have too many customers in Bali, or too few, or that Bali appears to be higher risk now on their statistical modelling, or that they (as a company) were facing lots of claims from Bali residents.

In fact a few months ago, one insurance company executive (not from Expacare) mused to me that it seemed that “people who live in Bali will claim on their insurance to be evacuated to Singapore for treatment of something as small as a broken fingernail”. His words not mine!

Either way it’s largely irrelevant why the costs are going up; the point of this post is simply to advise people of what’s happening and let them know that there are alternatives to simply paying whatever they get quoted – because different companies have different statistical models and different customer bases.

Part of our service offering is to find the best insurance cover for people, and we’ve been able to do that for a lot of Bali residents recently.

For example, one 45-year-old European recently had his renewal documents arrive from Expacare – last year his medical insurance cost him just over $3,500, but next year was being quoted at just under $7,500 (more than double). We got him the same level of cover for just under $2,700, which still just had a $250 annual excess on it.

A 42-year-old  mother-of-three was already paying Expacare over $7,600 per year for medical insurance for the whole family, we were able to source slightly better cover, with travel insurance thrown in at no extra cost, for just under $4,100.

It’s always worth checking and comparing prices – and levels of cover - for insurance, as you might be surprised just how much of a better deal you can get. And as a high-volume broker, we can usually get better prices than are available elsewhere – without costing anything to you the client as we get paid commission by the insurance companies.

So I’d strongly suggest reviewing your medical insurance plan, particularly if you live in Bali (even if it’s not with Expacare, because even though we’ve found them to be dishing out the biggest increases, we’ve still saved people significant amounts from other insurance companies recently too) – even if it’s not due for renewal yet!

It costs you nothing to find out, and could save you enough to pay for a decent holiday. If you would like us to look at your insurance and see if you could save, just get in touch; if you would like to meet someone face to face, one of my colleagues regularly visits Bali and will be down again in the near future, and will be available to meet you without any cost or obligation – just send me an email and we’ll arrange something.

Of course if you don’t live in Bali, that doesn’t mean you shouldn’t be just as vigilant with your insurance premiums – it’s often easier to save money that to make it, so don’t waste it! Just ask for a quote, we’ll do all the hard work on it.

Have a great week J

What Jakarta’s 44% minimum wage rise means for the Indonesian economy

It’s made big news all across Indonesia – although notably none of the large international news networks have bothered to report it – the new minimum wage for 2013 in Jakarta will be increased by a whopping 44%.

I won’t go into detail on all the basic repercussions of this move – which are both positive and negative in some respects, regardless of which side you’re on – as they’ve been fairly extensively commented on by local and national media here in Indonesia.

But there are a couple of points – key points, in my opinion – which seemed to have been overlooked so far in the general reporting of this news.

The first is this: Individual decisions or policies are largely irrelevant; it’s how they fit together that is the important thing.

For example, consider a traffic intersection: really it makes very little difference which line of traffic goes first. But if they all go first, you’re screwed. Jakarta residents will undoubtedly be aware of this…

And so it is with economic policy. Like balancing a set of scales, it doesn’t matter which individual weights go on which side, the important thing is that the weights add up equally. If they don’t, it crashes.

Govenor Jokowi has already instigated some other initiatives besides signing the minimum wage increase, particularly in the public sector. If successful, things like getting people to actually turn up to work, getting people to actually do their job, and getting people to stop stealing money from government budgets will have a far bigger impact on economic prosperity than any amount of tinkering with wage levels.

Much has been said about productivity levels generally – according to the UN, the average Malaysian worker is 2.5 times more productive than the average Indonesian worker (that’s 150% more). Whilst the main reason for this is simply “poor work ethics” in Indonesia, another significant difference is the lack of good infrastructure in Indonesia – both physical and bureaucratic. Some really basic improvements in this area will improve productivity by a lot more than 44%.

So if changes to the minimum wage level will be accompanied by positive changes in other areas, Indonesia and its economy will be much stronger overall. If other stated objectives fail to materialise, all that will happen as a result of the wage increase will be further falls in the value of the Rupiah, and even higher inflation.

Which brings me on to the second key point. As widely reported by the media here, if you simply just increase labour costs, it simply increases the cost of goods and services, which is basically what inflation is – the same end product but at a higher price than before.

But the key point for investors (and in fact for everybody connected to the Indonesian economy in some way) is not inflation itself; it’s the fact that the “official” inflation figures are clearly a lot different than “real” inflation, felt by most people.

Officially, inflation in Indonesia is currently running at 4.6% - almost perfect apparently, when compared to Bank Indonesia’s stated aim of between 3.5% and 5.5%.

Inflation is calculated using a “basket of goods and services” – i.e. a selection of items, and measuring their average prices. Generally speaking, over any particular time frame some things will rise in price, and others will fall. The average should, in theory, give a fairly accurate representation of how much more expensive “things” are generally.

The key to successful inflation tracking is not the maths itself, it’s in what goods and services to select for tracking, and in what quantity. For example, tracking the price of a new Ferrari in Indonesia is largely irrelevant. The price of rice is very relevant.

But that’s all largely academic – the key point is this: The purpose of calculating an inflation rate is so you can use it to make other important decisions, such as what interest rate to set. Bank Indonesia quotes this “low inflation rate” often, when discussing the official Bank Rate.

But increases to the “cost of living” have led to protests across Indonesia – from the recent 33% quoted by labour unions in Jakarta to the 35% quoted by labour unions in Papua. And these protests have directly led to policy changes by both government and businesses.

This means that some top-level decisions are being based on low inflation figures, and others being based on high inflation figures. Obviously workers on the minimum wage are not fully representative of the country as a whole, but they are the ones most affected by price increases. And there are a lot more poor people in Indonesia than rich people.

So somewhere along the line, decisions are being made based on either inaccurate information or irrelevant information, which is somewhat less than ideal.

So what does this 44% increase in the minimum wage mean for the economy? Ultimately not very much, on its own. But, bringing it full circle, how this policy fits with other policies will shape the size and duration of the current “economic boom”, and most probably the size and duration of the “economic bust” that will follow (I’m not being pessimistic here, a boom is ALWAYS followed by a bust, the only variables are the size and duration of each).

There are certainly interesting times ahead… 

Important information for litigation fund investors

More details have emerged about the first of the litigation funds to collapse, Axiom, which are relevant to anyone who has invested in this scheme, or another similar one. Links to information sources are below, and I’ll summarise it here.

The current headline on the “Offshore Alert” website is this:

“Axiom Legal Financing Fund appears to be a Ponzi scheme”

It goes on to detail some key points, including the news that the fund’s biggest borrower, ATM Solicitors, has borrowed £50million (approximately $80million), but has no cash to repay it; the managers of the Axiom litigation fund are also on the payroll of ATM Solicitors; the company was named ATM Solicitors because the directors joked about it being their cash machine; and the auditor, BDO Cayman – which also “audits” a lot of the other litigation funds – published accounts based on forged documents.

The editor of Offshore Alert, David Marchant, has written an open letter to investors in the scheme, which I’ll quote here in full:

“The bad news is that you have been defrauded of your investment in Axiom Legal Financing Fund. Your money has been embezzled by the Fund’s controlling person, Timothy Schools, and other insiders. The sooner you accept this, the sooner you can start taking steps to recover some of your losses. The worst thing you can do is hold out any hope that the Fund is going to get back on its feet. Trust me, that’s not going to happen. It’s inevitable that the Fund will go into liquidation.”

“The good news is that the level of incompetence, unprofessionalism and negligence by the Fund's advisers and those entrusted with looking after your interests is possibly the worst I have seen in 27 years as a journalist. This means that Axiom's liquidators, when they are eventually appointed, will almost certainly recover millions of dollars in damages from them or their insurers in lawsuits that I expect to be slam-dunks. Unfortunately, the liquidators and their own professional advisers will keep much of this as fees and costs. The eventual liquidation dividend to investors is likely to be much less than your losses. I'm sorry but that's just the nature of the beast and the price you must pay for investing in an overtly-ridiculous scheme that had red flags plastered all over it.”

“You, as investors, have no direct claims against the Fund's professional advisers. It is up to the liquidators to bring such actions on your behalf. If you do sue them, your actions will be stayed in deference to lawsuits filed by the liquidators. So don't waste your time, effort, or money pursuing this course of action.”

“You can, however, sue financial advisers and others who directly induced you to invest in this fraudulent scheme. Frankly, they are sitting ducks for successful litigation. Time is of the essence, though, since there will be a statute of limitations on filing a claim. For more details on suing a financial adviser for recommending a fraudulent investment product that was exposed by Offshore Alert, I recommend that you read this informative blog [the link is below] from 2005 by Bevans law firm in England.”

“Good luck and learn this lesson: Before you invest in another scheme, do some credible due diligence.”

I’d like to elaborate on a couple of his points, and make an extra warning.

Firstly, “the worst thing you can do is hold out any hope that the Fund is going to get back on its feet”. You will likely be told, by everyone from the managers of the fund through to the people selling it, that the money will be recovered, everything will be fine, nothing has been proved etc. This is clearly untrue. You need to accept that you've lost the money, and if you were relying on that money to fund something important, such as your retirement or your children’s education, you need to start rebuilding your wealth, NOW.

Secondly, “that’s… the price you must pay for investing in an overtly-ridiculous scheme that had red flags plastered all over it”. There’s not just one Litigation Fund out there, there are several. Whilst many are simply “feeder funds” for this one that’s gone bust (branded differently but the money ends up in the same place), some seem to be separate.

If you've invested in one of these other schemes, you will likely be told, by everyone from the managers of the fund through to the people selling it, that everything is fine, this isn't the one that’s gone bust, this one has nothing to do with the Axiom one, and you have nothing to worry about. Are you being lied to?

Any legal financing fund which purports to offer high, fixed returns, backed by an insurance policy, with no downside risk, has exactly the same “red flags” as the one that has gone bust first, and in my opinion is just as “overtly-ridiculous”. In my opinion, LAWYERS DO NOT NEED TO BE PAID IN ADVANCE FOR CASES WHICH THEY WILL EITHER WIN, OR RECEIVE AN INSURANCE PAYOUT ON IF THEY LOSE.

Finally, a warning for what will happen next. The whole thing is unravelling  and the race is on to get as much money as possible before the inevitable collapse. Other schemes, similar to the one that has gone bust, will go on the offensive. They will shout from the rooftops how shocking it is that another company has acted in this fashion. They will bemoan their “business model” being brought into disrepute.

They will seek to reassure investors that they are doing things properly, so properly that they expect to make even more money than they previously thought! Maybe some will even say how they are in a position to make money through this scheme’s demise, by taking over some litigation cases or even suing this Fund themselves!

And of course, to thank and support the loyal salespeople who are selling their fund, they’ll increase commissions/bonuses to those who sell lots more of it – so expect to be asked if you want to invest more money into this scheme.

In fact, why not ask your financial adviser if you should invest more money into a litigation fund?

If they say yes, re-read the above, some of my previous blogs, and the links below, and decide if they really have your best interests at heart, and if they’re competent enough to look after you.

If they say no, ask them if their previous advice to invest into a litigation fund was good advice or not, and decide if they really have your best interests at heart, and if they’re competent enough to look after you.

At Imperium Capital, we look into things in more detail. We chose not to be associated with these schemes at all, and have done our best to dissuade people from getting conned by them.

What we have done however, is sourced a product which could be of real benefit to people who have lost money as a result of these schemes. As our Group is authorised and licensed in Hong Kong, we have access to some of the better products available in this market, and can now exclusively offer these to clients in Indonesia and elsewhere.

One of the best is a regular contribution product from AXA, the world’s largest insurance company, which guarantees a fixed return over a set term, meaning that you are guaranteed to make a profit. There are different variations available, depending on your circumstances and whether your main requirement is higher protection for your family or higher returns, (it combines life insurance with savings and investments) but the bottom line is that whatever happens, AXA guarantee that you will get back more than you put in.

If you need to start rebuilding your wealth, this could be an excellent way to start.

If you’d like to find out more about this AXA product, or check the riskiness of any of your other investments, or simply get a second opinion on your own finances, please just send me an email and we’ll take it from there.

Sources and links:

The “Offshore Alert” Website:

www.offshorealert.com

The “Offshore Alert” article about the Axiom Ponzi Scheme:

www.offshorealert.com/axiom-legal-financing-fund-ponzi-scheme.aspx

David Marchant’s message to investors:

www.offshorealert.com/axiom-legal-financing-fund-asset-recovery.aspx

The Bevans Law blog:

www.bevanslaw.blogspot.com