Summit Notebook
Exclusive outtakes from industry leaders
Looking forward to inflation
By Tim Kelly
Yoshiharu Hoshino, the president of Hoshino Resort, one of Japan’s leading resort operators, is looking forward to a dose of inflation after years of sliding prices.
By engineering a rise in rates by printing money, he reckons Japan can make a big chunk of its burgeoning national debt disappear, which along with tax hikes is, he predicts, likely the way Japan is going to exit a potential crisis as debt soars to more than twice its gross domestic product.
While having the nasty side affect of making assets worth less tomorrow than today, if, like Hoshino, you borrow money to buy the bricks and mortar of hotels, the plus side is your debt, relative to your cash flow will also get smaller as long as you have low rates locked in.
“It would be a very big plus,” said Hoshino told the Reuters Rebuilding Japan Summit in Tokyo. Japan defaulting on its debt is unlikely, he said.
Resort owners who agree with Hoshino, who already own 27 facilities in Japan, may therefore be tempted to borrow more to buy more and wait for robust inflation to pay the loans back.
Fear factor driving gold higher
“Gold is not an investment. It doesn’t pay you interest and it doesn’t increase wealth,” complained one investment advisor recently as he perused exploding client demand for the yellow metal.
“It’s just a cautious asset for scared investors,” he grumbled as he waved a chart showing prices had once again hit an all-time high.
Some anecdotal evidence suggests he may have a point.
Bankers at this week’s Reuters Private Banking Summit said investors were loading up on gold to the tune of some 7 to 10 percent of their portfolios.
The traditional motive of hedging against inflation was conspicuous by its absence.
The wealthy were buying gold because they were worried by the possibility of deflation, by a collapsing dollar or by the threat of prolonged financial turmoil.
Many were getting exposure through gold-backed exchange traded funds or gold stocks related stocks.
Investment advisor made this statement in the article: “If we did have a global financial meltdown, what do these people think they could actually do with the gold,” said the investment advisor.
This is why I handle my own investments. Compare yield in gold to yield in stocks for the past 10 years. Gold made 10%-15% more than stocks and didn’t decrease in purchasing power. In the economic climate that we have now gold is safety and it makes wealth for the investor.
You can’t avoid the taxman, but there may find a friendlier one in the Alps
With the German government hot on the heels of untaxed wealth stashed in Swiss bank accounts, and the U.K. government taking a tougher stance on clawing back bonuses, rich folks will likely head for the hills – or the Alps to be more precise – senior private banking executives said in Geneva.
“People are going to arbitrage different tax jurisdictions. We are going to see European clients moving to Switzerland, very large families,” said Alberto Valenzuela, deputy chief executive of Societe Generale Private Banking (Suisse) SA.
JP Morgan, which specialises on clients with $20 million to invest, is hoping to tap into the pool of wealthy exiles.
“We are seeing an affluence of international people moving to Switzerland and we want to develop a practise that can serve families,” said Pablo Garnica, head of private banking for Europe, Middle East and Africa at JP Morgan.
