Comment of the Day
Video commentary for November 15th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: China extends rebound, Wall Street steady, Singapore Financials breaking higher, gold steady, bond yield contract, high yield spreads rolling over, bitcoin steady,
Email of the day on bond investing:
Interested in your investment purchase of DoubleLine Income Solutions Fund. as a long term subscriber I’ve now moved into another investment age whereby I am now an income & growth investor and the timing of your purchase appears to be potentially beneficial.
I have checked with a number of UK online investment portals and they do not appear to offer access to this closed end fund and therefore my question is whether you accessed this via a US trading platform or direct?
Any help will be appreciated.
Eoin Treacy's view - Thank you for this question which may be of interest to the Collective. Growing up in Ireland in the last 1970s and early 1980s interest rates were very high. My grandmother used to buy national savings certs for all her grandchildren. They automatically rolled over the interest at maturity. As a teenager, I cashed them in and found they had risen by over 300%. That taught me the simple lesson. Buying bonds when rates are high and before inflation peaks is very attractive.
Xi's Crackdowns Drive Chinese Billionaires to Booming Singapore
This article from Bloomberg may be of interest to subscribers. Here is a section:
Singapore doesn’t provide detailed statistics about where its wealthy immigrants come from. But the explosive rise in family offices are symptomatic of the attraction for Chinese tycoons. The number of these offices almost doubled to about 700 at the end of 2021 from the previous year. While China’s wealthy aren’t the only drivers of the growth, some service providers say they are by far the largest market.
Michael Marquardt, whose firm IQ-EQ Asia helps set up family offices, said the number of inquiries from Chinese clients jumped about 25% to 50% just before and after the Party Congress. Vikna Rajah, head of tax and trust at law firm Rajah and Tann Singapore LLP, said in June that more than 30% of the clients he’s helped apply for family office tax exemptions are from Greater China, including Hong Kong.
“There’s definitely been an increase in interest,” Marquardt said. “Entrepreneurs who have done well and taken their companies public are interested in parking their international wealth in a place like Singapore.”
Eoin Treacy's view - The natural comparison is between Singapore and Hong Kong because they are both in Asia with majority Chinese populations. However, the better comparison for Singapore is with Switzerland and Luxembourg. The city state’s economy is much more focused wealth management and the buy side than the sell side/capital markets expertise of Hong Kong.
British Families Are Being Hit by Stealth Taxes
This article from Bloomberg may be of interest to subscribers. Here is a section:
For lower-earning families unaffected by the child benefit clawback, but perhaps struggling even more, it is usually possible to transfer £1,260 of a non-working spouse’s personal income tax allowance to the working partner. This can potentially save £252 a year. Again though, this is not automatic, it must be claimed.
And these are far from the only tax anomalies. Since 2009, those earning more than £100,000 a year have had their personal income tax allowances clawed back at the rate of £1 for every £2 earned above the threshold. Worse still, the threshold has been unchanged for more than 13 years. Anyone earning £125,140 or more loses the entirety of their personal income tax allowance.
Here again, making additional pension contributions is a good option for reducing your taxable income — and for those earning more than £100,000, it might be a more realistic option. The sweetener is that the effective tax relief for those affected can be up to 60%. For these people, the government effectively contributes £60 for every £40 they pay into their pensions.
Stealth taxes make things more complicated for everyone. Many lower-earners end up paying far more tax than necessary, or not receiving a benefit to which they might otherwise be entitled, often both.
Unfortunately, especially during periods of rapid inflation, such tax strategies are the gift that keeps on giving for governments, raising additional revenue without having to increase tax rates. .
As an old ad for Morgan Stanley (NYSE:MS) once claimed, “You must pay taxes. But there’s no law that says you have to leave a tip.”
Eoin Treacy's view - I saw this chart from Eurostat yesterday and it surprised me that the European aggregate tax haul had risen so much ahead of the pandemic.
With the overwhelming spending patterns of the pandemic and the resulting inflation, there is clear need to fiscal consolidation. At present that is focusing on tax hikes but the ultimate nettle that needs to be grasped is spending cuts. That’s not just true of the UK, it’s an issue most European countries and the USA have to deal with eventually.
Eoin's personal portfolio: hedge short profits taken, trading short losses taken, investment positions initiated November 10th 2022
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.
The Chart Seminar London November 21st and 22nd 2022
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