The Club’s Investor Outlook for Greece and Turkey
A poem by Semonides of Amorgos
Trans. by Edmund Keeley
The man from Chios called Homer said a beautiful thing:
“The generations of men are like the leaves of a tree.”
Few mortals who’ve heard this take it to heart:
all men carry the hope rooted in their youth.
While mortals are still living in youth’s lovely flowering,
light-headed, their hearts cling to many vain things:
they won’t grow old, they’ll never die,
and being healthy, why give sickness a moment’s thought?
Fools to think that way, they don’t yet know
how quickly time moves for mortals, how short the young days.
But since you know this now that your end is near,
treat yourself entirely to what good things there are.
Last week, the Club concluded its Financial Discovery Tour to Greece and Turkey, including Istanbul and Athens, with excursions to the Greek islands of Poros and Hydra. We traveled with a very affable group of 30 Club Members, including our Chairman James B. Cooke, our Chief Investment Strategist Alexander Green and several experts on art, collectibles and doing business in this region.
On this trip, we were fortunate to have the company of:
- A senior director of Sotheby’s from Hamburg, whose family is one of the most prominent royal families in Germany.
- Several highly successful and knowledgeable collectors of European antiques, stamps and rare coins.
- One of the leading attorneys from Istanbul responsible for handling many of the first and largest privatization and foreign investment deals in the country.
- A tax expert who has decades of experience providing sophisticated tax and business planning, including changes in reporting requirements for U.S. investors allocating assets offshore.
- Members from China, India, Germany, Australia and the U.S. – including accomplished doctors, chemists, engineers, university professors and entrepreneurs.
This is the class of investors our World Financial Seminars and Events regularly attract. Generally, more than 40% of any of our tours are repeat attendees. When you participate in one of our tours, you can make lifelong friends with experienced travelers who share the Club’s sense of adventure and passion for learning about overseas markets firsthand – and do it in style, with many opportunities to enjoy excursions along the way.
My brief travelogue for our latest adventure begins in Athens, continues with our adventures in Istanbul and closes with highlights from the speakers that presented to us along the way.
The sun god Helios shined his light on our group during the tour.
We enjoyed 12 straight days of perfect weather and shared once-in-a-lifetime experiences all around. We came away with a mostly sunny investment outlook for both countries, still wary of some dark political and economic clouds looming on the horizon.
Frankly, I left more excited about investing in Greece than in Turkey. Some of our attendees felt the opposite, as I’ll explain in this report.
If you only have the time or capital to consider one recommendation, read Alexander Green’s outlook on the Greek market, including his favorite way to play it – which he wrote about in the July issue of his Oxford Communiqué. Alex recommends we invest a greater portion of our global stock allocation in emerging markets while they are cheap. Greece is one of his favorites, having been downgraded from “developed” to “emerging market” status by the MSCI. You can access his Oxford Communiqué article on Greece here.
Pilgrimage to the Agora
I felt greatly moved to finally visit the birthplace of Western art, philosophy and democracy.
Of course the trip included a guided tour of the Acropolis museum and a stroll around the 2,500-year-old Parthenon. Unlike some other grand ancient monuments like the Pyramids or the Taj Mahal, the Parthenon was conceived on democratic ideals.
It was commissioned by an electedHellenistic leader, Pericles, who got the votes he needed by promising it would create jobs for artisans and craftsman. Pericles loved Athens and wanted a monument that would show off Athens as the world’s first democratic superpower.
If you haven’t been to the Acropolis yet, I highly recommend you add it to your bucket list.
Standing in front of the mid-fifth century B.C. Parthenon and the nearby Erechtheum of Poseidon, it was easy to feel moved by the early democratic ideals that inspired its creation. I imagined the scenes of Hellenic life, where philosophers and orators like Plato and Pericles would gather to discuss what enlightened ideals of democracy, intellectual freedom, rule of law and wealth meant in the context of the day.
As you stand on the marble ruins of the Acropolis, you can clearly see the ancient Agora, with its verdant park surrounding the Monument of Lysicrates.
It was like I was completing an American pilgrimage – not only to the birth of Western civilization, but to the original Agora, the namesake of the company I had joined shortly after graduating with an MBA over 25 years ago.
Bill Bonner, one of the founders of The Oxford Club, launched this global financial publishing company in the ’80s with his first publication, International Living. He chose to name it Agora Inc. because it serves as a portal to organizations like The Oxford Club, which are “marketplaces of ideas” on free markets, wealth and well-being.
The Origin of America
A group of us returned to the Agora the next day, only to find it closed due to a regular concert series at the monument and in the ancient Acropolis amphitheaters.
However, on my way there with Club Chairman James Boxley Cooke and his wife Jane, we stopped in front of the Acropolis museum and asked a kindly looking, nicely dressed older gentleman for directions. His name was Stavros Theofanides.
He wasn’t your everyday man in the street, but a delightful local and semi-retired “nutty professor” with a Ph.D. in economics from the University of Manchester in the U.K. from 1964. He had also worked at the World Bank and is an author of many books.
The professor wasted no time in giving us a copy of one of his paperbacks, for a “donation” of course, called Europe: The Symbol of Creativity and Civilization. Given his cheery reception, we happily paid him. It turns out the professor is an impassioned “EU-phile,” as his book reflected. He wants to see a Europe more united philosophically, not just financially – much the way our forefathers envisioned America and the union of our states.
The professor proposed a new design for the Euro that would reflect unity of the member states. He went as far to include letters he wrote to the EC in Brussels in 1996, claiming in the book and to us that it was he who originally proposed the concept of transforming the EC into the EU. And saying it was he who originally proposed the idea of a single currency, as his published letters allegedly prove.
We nodded our heads politely but skeptically at this proud Greek, contemplating whether to accept him or dismiss him as delusional.
One of the Best Views in the World
The first night we arrived in Athens, we gathered for a welcome on a rooftop bar ranked No. 1 in the world by MSNBC.com. It also crowns the historic Hotel Grande Bretagne, where we were staying. (Highly recommended for Athens.)
At the top, we were greeted by a fabulous sunset view of the Parthenon on the distant hill. With cameras out, we toasted the start of our journey.
Athens is a relatively modern metropolis, a magnet for the 10 million people living in Greece.
From our welcome reception location, we could look out and see the dilapidation and congestion from poor urban planning in the ’50s and ’60s with the centuries’ old antiquities adorning several hills that pop up out of the sprawl.
But as we descend and explore the city at street-level, walk the historic squares that have undergone impressive facelifts or take the modern metro born from the 2004 Olympics, Athens appears re-energized… from a civil and financial perspective.
The stock market is up, Greek bonds were recently upgraded and the latest issuance sold out. Germany seems happier with Greece, tourists are coming back, second-home purchases from expats are ticking up again, and city streets and cafes are filling up with the comings and goings of the more cosmopolitan and progressive minds of the Athenian young urban professionals.
You can see the uptick in Greek and other international property prices at www.themovechannel.com, the leading independent website for international property, with more than 800,000 listings in 100 countries. Also check out The Oxford Club’s Property Exchange network here.
Thanks to our admittedly indulgent affair of delicious Greek feta, steak, fish, baklava and ouzo, we collectively left Greece feeling physically heavier, but still lifted by the country’s new upward momentum. Greek equities are like the weather we experienced: mostly sunny but not too hot.
Of course, like with weather, that forecast could change quickly. If the country does not push forward to fix its fiscal mismanagement, reduce its huge unemployment rate (60% for young people) and get out of its recession, expect clouds to roll in.
Journey to Constantinople
Nowhere is the struggle between old and new more apparent than in Istanbul, the final stop of our Financial Discovery Tour.
Our transition from the peaceful and bohemian Greek Island living of Poros and Hydra to one of the largest cities in the world was jarring, but not in a bad way. Poros is an undiscovered gem of a “greener Greek island” with easy access from Athens. It used to be Fritz’s second home for many years. He was the perfect host, as he delighted showing us one of his favorite places in the world. For Fritz’s travel recommendations for Greece and Turkey, click here.
We were ready to embrace Turkey’s struggle between its secular and traditional Islamic societies… its struggle between democratic values and dictatorship… its congestion and noise… all combined with the beauty of the rivers flowing alongside the historic mosques and palaces, the unique convergence of the Black Sea and the Mediterranean with the Bosporus.
From our rooms at the InterContinental Hotel, off Taksim Square (the site of many protests), we looked out past the University onto the Bosporus.
Traveling down the river (there are many boats to ride and dine on), we pass the ancient stone walls that once guarded the Christian Byzantine capital, Constantinople.
Inside the walls is the old city, with its many historic sites still standing, my favorite being the iconic Hagia Sophia. This is a highlight of any trip to Istanbul. Nowhere in the world can you find such a beautiful, powerful place of worship that includes both Christian and Islamic ancient art and adornments.
Istanbul calls itself secular, Europe’s bridge between East and West, and hopes to be a top-rated global financial center someday. It claims to be taking tangible steps to curtail corruption, open its markets, loosen restriction on foreign investments and finally, stabilize the weakening local currency, the Turkish lira. But for every move toward freer markets, I saw signs of trouble.
Certainly Turkey’s corruption, human rights violations and lack of transparency keep it far from qualification into the EU. Current Prime Minister ErdoÄŸan says he’s trying to change that. But the secular progressive Turks we met were very skeptical.
We also had a private meeting with one of the country’s top attorneys, Fethi Pekin of Pekin & Pekin. He focuses on helping Turkish and foreign businesses with capital funding and privatization deals.
Fethi believes Turkey is on a progressive path, but can be distracted from that path.
Watch for the upcoming elections and the unrest in the Middle East that could hinder progress. The country’s goal is to achieve all the reforms and growth needed to become one of the most important financial and trading centers in the world by 2023.
Turkey can point to real progress in the last 10 years – increased GDP, lower inflation, lower unemployment and a higher stock market – under the pro-business leadership of Prime Minister ErdoÄŸan,
This year, ErdoÄŸan will most likely be the first prime minister to be elected president. In expectation of ErdoÄŸan winning the presidency, he has won constitutional reforms that strip the military of some of its powers and transitioned those powers to the presidency. (Note that for the last several decades until this year that presidency in Turkey has been mostly ceremonial).
I wish I could share Fethi’s optimism, but with Turkey bordering Iraq, Iran and Syria, the unrest in the Middle East is unnerving. So is ErdoÄŸan’s push against secular reforms like Islamic woman having more freedom of dress (his wife covers up), Western advertising, barring drinking alcohol in certain commercial venues, etc.
The secular progressive Turks we talked to were not happy with ErdoÄŸan… They see the pendulum swinging the other way, away from Western freedoms.
They have journalist friends who have been jailed; friends who are oppressed during peaceful protests for simple freedoms that we take for granted. They believe ErdoÄŸan is becoming a dictator.
They also don’t like that ErdoÄŸan just gave 1 million Syrian refugees open entry into the country, with free healthcare, free education and, not coincidentally in an election year, instant voting rights.
Turkey now has huge refugee camps with tens of thousands of people living in them. And in the city, we saw troubling sights of Syrian mothers with their kids in the streets looking for shelter from a big thunderstorm. They were shooed away.
I’m nervous about what’s happening just across the border from Turkey. I can’t believe that with Syrian immigrants (which undoubtedly included immigrating members of ISIS) together with the Kurdish situation, there won’t be unrest down the road in Turkey.
Fethi mentioned that Turkey was No. 2 in the world behind Russia for the number of human rights cases that came up before the Human Rights Tribunal last year.
My colleagues were impressed by the energy and drive of Turkey. Its atmosphere is much more ambitious than the laid back lifestyle in Greece. And its economy is growing faster and with less unemployment. The Turks appear to be hungrier than the Greeks for economic success. And ErdoÄŸan is successfully pressuring the central bank to curtail capital flight.
For our final evening in Istanbul, the sky opened up and we finally received the rain, hard.
We had a lovely sunset yacht cruise planned along the Bosporus that would bring us to the historic steps of the Ciragan Palace next to the Kempinski Hotel in the old city. Unfortunately, the weather had other plans for us, and due to the rain, we were unable to take the cruise. Our spirits were not dampened, however, as Fritz was quickly able to secure a bus to get us there and kept everyone entertained with stories from his 30-plus years of leading tours around the world.
We arrived at the exquisite Palace as the rain tapered off. There was a lovely sunset, wonderful food and sad goodbyes to the new friends we made on this memorable financial discovery tour.
Investing in Turkey
For Greece, Alex noted the cheapest and best way to capitalize on its turnaround is through an ETF (See the July issue of his Oxford Communiqué).
The same can be said for Turkey, through the iShares MSCI Turkey Investable Market Fund (NYSE: TUR). It’s already up 19.1% for the year at this writing, but several of my colleagues believe it has a lot more upside.
If you are looking for a broader approach, you may want to consider a managed fund that covers that entire region. Our friend Frank Holmes of U.S. Global Funds has the Emerging Europe Fund (Nasdaq: EUROX) which is currently allocating 24.29% to Turkey and 11.80% to Greece. The rest is distributed between France, Hungary, Poland, Austria, Italy, the Czech Republic, Russia, Sweden, Romania, Germany, the U.S. and Norway.
You will pay more fees through this fund (expense ratio: 2.13%), but Frank has experts on the ground there who are well connected and are particularly bullish on the banks in Greece and Turkey. As with the iShares Turkey ETF, over 40% of the fund is allocated to the financial sector. For information, go to www.USfunds.com.
Greece/Turkey Speaker Highlights
Hosted by Julia Guth, Executive Director
The Oxford Club, June 2014
Chief Investment Strategist
The Oxford Club
Alex is bullish on emerging markets in general, including Greece. During his presentation in Athens he reminded us that Greece was knocked down to “emerging market” status. Prices are still cheap. He sees positive momentum for Greece – check out his cover story in the July issue of The Oxford Communiqué recommending an ETF as the easiest, most liquid way to capitalize on Greece.
[Note: Mark Mobius of Templeton Funds is also buying Greek companies for the first time in a decade.]
Alex spoke to us about the Club’s investment system and how it informs our asset allocation. Stocks continue to be the best asset class, which is why we have a 60% allocation to equities. And he looks for stocks that fall into at least one of three categories: growth/momentum, insider buying and “true” value. As most Members know, Alex founded three active, shorter-term trading services around these three dimensions.
When finding value in today’s market, he warned us, don’t get caught up in the “value trap” and buy a stock or fund just because it’s cheap. Hunt for deep discounts based on earnings projected over the next 12 months.
Alex uses Warren Buffett’s favorite indicator: return on equity (ROE), which is equal to net income returned as a percentage of shareholder equity. Buffett compares one company’s ROE over five to 10 years with other companies in the same industry. The more effective the use of resources, the higher the ROE.
Alex fielded questions from Members about the Club’s recommended equity portfolio for longer-term investing.
Monsanto (NYSE: MON) still seems to garnish the most controversy, even from a few of our tour participants, particularly investors from Canada, Europe and Australia, who dislike Monsanto over its GMO policy.
Alex acknowledged that many investors see Monsanto being “kicked out” of important markets in the near future. This could put downward pressure on the stock. Alex responded that scientists have ruled that GMOs are not harmful and even chains like Whole Foods will continue to carry genetically modified food, but will label it as such. Despite the backlash, Alex sees more room for profits. Shares of Monsanto are up since we recommended it.
Dr. Katharina Prinzessin Zu Sayn-Wittgenstein
Senior Director, Sotheby’s Hamburg
+49 40 444 080; firstname.lastname@example.org
The Wittgenstein family is one of the most prominent royal families in Germany. Katharina, our “real live princess,” has lived and studied in Vienna and Prague and is now based in Hamburg, Germany.
She brought up the 2014 chart from Arts Economics, which showed who is buying which type of art by country. The U.S. (38%) is still No. 1 for art sales, with China (24%) starting to catch up at No. 2 followed by the U.K. (20%) and France (6%).
By far, the top art purchases are contemporary (46%), followed by modern (29%), then impressionist (13%), and finally old masters (10%). Most buyers under the age of 40 buy contemporary art.
Katharina sees the most value in purchasing the impressionist or old masters art since they are “out of fashion” and prices have fallen a good deal. You can get a high-level “blue chip” painting in these categories now for $30,000, but a quality modern or contemporary art piece would cost you a lot more.
She said if she were buying right now, she would look at German 19th Century paintings, which are completely undervalued today.
Katharina noted that you know an emerging market is worth investing in when the locals start buying their own art and there are more galleries in the cities showcasing native art.
We are seeing this in Turkey; there are more private galleries showcasing Turkish art and more Turks collecting. I was surprised to hear that a majority of art buyers look more to galleries and less to auctions and artists directly, although online purchases are increasing.
When purchasing art, consider the liquidity of the market and the resale potential.
Wine collecting and auctions, fairly liquid markets, are also getting more and more important in the collectors’ world. Another good value she recommends right now is classic furniture, since prices have collapsed in recent years.
Always consider the emotional return on a purchase first, she told us, and buy what you like. But as an investor, don’t forget that the subject matter is important for resale. For instance, don’t limit your resale market with gross or morbid subject matters.
She mentioned The Fine Art Fund as a way to invest (The director of The Fine Art Fund, Philip Hoffman, has spoken to Oxford Club Members on our previous trips to Europe).
However, Member Phyllis Lapham, a prominent antiques dealer and interior designer also on our tour who has lived and done business in NYC and Paris, disagrees. She doesn’t think funds are the way to go, but agrees that undervalued old masters are the best purchase, something you can see and display.
Katharina presented us with a number of great resources investors use to track the art market. For instance, AXA Art (insurers) tracks which art sectors are the most popular.
Currently paintings are No. 1, followed by prints, sculptures and then photographs. Katharina says collectors often turn to sculptures after they have filled their walls with paintings. And prints can be a more affordable way to invest in top artists.
The best places to learn about art are the art fairs, where you can get a comprehensive overview. Check out these sites for their next renowned events: TEFAF in Maastricht (considered No. 1 in the world), Art Basel in Miami Beach and Hong Kong, and The Frieze Art Fair in London and NYC.
Also check out The Art Newspaper. On Sotheby’s website, you can see all recent sales. Unlike before, all purchase prices are now listed for all auctions. Sotheby’s has an evaluation department for your art and experts for different sectors. It even has videos from collectors who teach about art forms and would be happy to answer your questions and guide you.
CEO, Asset Strategies International (ASI)
Michael is the Club’s go-to guy on precious metals, foreign currency and offshore asset protection/banking. He first launched the Perth Mint storage certificate through The Oxford Club 20 years ago. His nephew, Rich Checkan, is the president and COO of ASI and recently joined us for The Oxford Club’s European Opportunity Expedition.
Michael sent up a red flag to anyone interested in buying rare coins. He noted there are 6,000 dealers in the U.S. – but only 600 of them are registered members of the Industry Council for Tangible Assets (ICTA). The other 5,400 could be good or bad, but there is no way to verify them in the industry.
ASI uses Douglas Winter, based in Oregon, as its expert on rare coins.
Gold Buying Trends
These days Michael only recommends gold coins that are 24 karats. They have the best re-sale value today – because that’s what Asian buyers want. As for storage of coins, he sees most buyers now taking delivery. He does not recommend storing coins in safe deposit boxes because they’re not insured. Better to store them in the house or be a “midnight gardener” – although you better remember where you stashed them.
There are pros and cons to offshore storage facilities around the world. He still recommends the Perth Mint certificate program in Australia. One nice thing about offshore storage is that precious metals do not have to be reported as an offshore account. There are no reporting or tax requirements until you go to sell your gold and repatriate the proceeds back into the U.S. The key is to make sure your metals account is an “allocated” account (meaning it’s allocated just to you as owner) not an unallocated (or pooled) account.
As for gold’s prospects, well, of course ASI is bullish all around, due to greater demand coming from the developing world.
Outlook of Rare Coins – Special Excerpt
Michael asked Douglas Winter to work with ASI clients, as Doug is the dealer of choice for some of the world’s biggest collectors and the acknowledged world’s leading expert in pre–1933 rare U.S. gold coins.
The Rare Coin Program (RCP) has become one of the most popular of all our tangible asset offerings.
Rare coins, with a proper plan, are easy to manage and hold. In fact, with our Rare Coin Program, we help with the selection, storage options and eventually, liquidation of your coins. Your coins are handpicked by experts looking for great coins with great potential as part of the ASI RCP.
Now, for the “hot deals.”
Doug has come up with coins in every price category. When you review Doug’s picks, concentrate on how collector oriented he is in his thinking. The uncorrelated nature of the market jumps out at you.
Doug suggests coins that are PCGS (Professional Coin Grading Service) graded, CAC approved and dated prior to 1880. He adds, “the (collector) interest factor for coins in this price range was greatly improved when I offered large sized issues, e.g. eagles and double eagles.” Specifically, Doug’s picks in this price range include:
- 1852-D $5.00 PCGS EF45 – Dahlonega half eagles in EF40 and EF45 condition. Doug feels, “The level of demand for nice D mint half eagles is very strong now, especially if they are choice, original coins. In the last few years, values have crept up from $1,600-$1,800 to around $2,200-$2,500-plus, and I see no price resistance to even higher numbers for the right coins.”
- Motto New Orleans eagles, MS61 and MS62 (1888-1906) – According to Doug, “prices could go up 20%-40% without anyone batting an eyelash. The possibility exists that set collecting could drive this series higher.”
- Low-grade coins, in less than mint condition, but with rare dates are also in high demand and affordable. Doug reasons, “A coin like an 1861-S eagle is too expensive in higher grades for most collectors. But, a nice Fine or Very Fine can be bought for a few thousand dollars. And, if the coin is worn but cosmetically appealing, it has a strong level of demand that didn›t necessarily exist a few years back.”
Doug calls these his “bread and butter.” They attract very selective collectors, looking for the “it” factor before they buy. Doug has coined a phrase in the industry, Multiple Levels of Demand, to define this “it” factor. This includes an interesting history, good visual appeal and, of course, rarity. It’s not easy to find such a coin, but when you do, you have a truly hot deal on your hands. But, Doug has found these:
- 1841-D $5.00 NGC AU58 CAC – properly graded AU58 branch mint quarter eagles and half eagles. “Southern branch mint gold coins remain one of the best values in all of 19th century numismatics,” says Doug. These have great eye appeal, making these coins sought after as compared to even the higher-priced MS60, MS61 and even an MS62, which can range from $9,000-$11,000.Here again it takes an expert to understand that a lower price might be more valuable than a higher priced coin in the long run, because only an expert understands collector temperament.
- The “Better date” Three Dollar gold piece – This series has been out of favor for quite a while. Doug believes some mild promotion could bring it to the forefront.
- 1915 $10.00 PCGS MS64+ CAC Indian Head Gold – These coins have special hot deal power because they are underpriced. The price of the next grade up, the MS65, is at least double or triple.
$20,000 or more:
The market in higher priced rare coins is as strong as any time since 2006-2007. The Chinese and many other collectors are searching for high-end coins. The market is brisk.
For good upside potential, Doug suggests, “Really exceptional branch mint gold coins in MS63 and MS64. If you look at auction prices from 1999-2001 and compare the values of a coin like an 1847-C quarter eagle in PCGS MS64, then versus now, you will typically see a slight overall decline,” he confides.
It is actually this price decline that makes investors smile. In Doug’s opinion, a choice, original CAC-quality Dahlonega half eagle in MS63 or a beautiful, naturally toned Charlotte quarter eagle in MS64, is truly rare. Those able to take the plunge at this level are expected to see good returns as demand increases in 2014 and beyond.
Doug has his ear to the ground when it comes to collector taste.
He sees great value in truly rare “business strikes,” coins struck for commerce as contrasted with proof coins struck for collectors. These formerly obscure rarities are now poised to increase in demand.
Doug detected this trend as early as 2013 when he listed an 1863 $5.00 NGC MS60 CAC on his website and got multiple inquiries from new sources of collectors. Two buyers told Doug they wanted the coin “just because it was cool.”
It is this type of collector behavior that makes rare coin investing uncorrelated with any other investment you might make. It is also why ASI has built the Rare Coin Program to make sure you do not make the mistake that merely a limited quantity or an older date means rarity.
Doug also believes “trophy coins,” ones that suitably combine rarity, appearance and a great story, will be in huge demand in 2014, despite their high prices. Records may be set in the million dollar price range. Doug becomes nostalgic when he reminisces that a decade ago a million dollar coin would make front-page news.
Today, such sales are relatively commonplace. He says, “As more ‘big money’ discovers the coin market, I look for many exceptional prices realized in 2014, both at auction and via private treaty.” What to do next.
As always, we recommend you start with a call to us to determine the purpose and goals of your asset allocation. Only then will Doug hand select your customized portfolio. Please call your ASI Preferred Client Relations representative today at 877-340-0790.
ASI has recently partnered with Geoff Anandappa to offer additional collectibles, like stamps, for its clients. Michael endorsed Geoff, and noted that stamps held by Stanley Gibbons or offshore storage are also not required to be reported as a foreign account.
Investment Portfolio Manager, Stanley Gibbons, Ltd
London: +44 20 7557 4442; email@example.com
Geoff is based in London but, like Michael, travels the world often. He recently spent a year in Hong Kong setting up Stanley Gibbons’ new office. Geoff is a collector of stamps from Ceylon (where he was born) and Great Britain. He showed us why rare stamps and collectibles are among the most undervalued asset classes: they have a low volatility over a 50-year period and no correlation to mainstream investments.
The art experts on our tour were most excited about the British Guiana 1 cent
(1856 1c Black on magenta) stamp. It came up for auction at Sotheby’s while we were traveling, and was sold for a new world record of $9.5 million.
Geoff also talked about Bill Gross, the bond king of Pimco Funds, who is an avid stamp collector. Bill said his stamp collection, which he bought for $2.5 million and is now worth an estimated $10.5 million, has outperformed both the stock and bond markets.
There is a GB250 Rare Stamp Index that has tracked price data for stamps since 1865. Stanley Gibbons is also a public company listed on AIM on the London Exchange.
Stanley Gibbons will manage a stamp portfolio for you starting at $15,000, with the average starting portfolio at $75,000. It gives you free storage, insurance and does not charge management fees, just brokerage commissions.
It also offers inventory and guidance on prints, autographs, rare coins and other collectables.
General Manager, Swiss Metal Inc.
Knut is an engineer from Norway who switched his career to running global sales for a team of rare and strategic metal managers.
His wealth-preservation services company is an integral part of a diversified Panamanian-based holding company, Two Oceans Property Consultants S.A., with $100 million of investments in rare industrial and precious metals. The group also offers real estate sales and development, food production and bottled water distribution.
Knut directs a highly experienced sales team of rare metals advisors that provide rare industrial and precious metals to high net worth individuals and institutions worldwide.
A look at his website gives you a breakdown of a typical strategic metals portfolio, from tellurium to bismuth. He can tell you what the supply and demand trends are for each metal at this time.
Professor of Art History, Lafayette College
Diane is an award-winning professor who has been teaching the art and architecture of the ancient world for more than 30 years.
Diane’s wonderful presentation took us on a timeline journey of ancient sculpture. She started with the harder, bronze-tooled Egyptian figures – they looked less human, stoic, straight-backed and strong.
She noted that, unlike the Greeks, the Egyptians embraced death in their art because they believed in the afterlife. Then she contrasted that bronze sculpture with the softer marble sculpture of the Hellenistic times.
Greek sculptures were much more alive, realistically human, and eventually even showed a body moving forward, with weight shifting to one side. Before that, all statues were standing straight to show power and strength, never vulnerability.
They were particularly brilliant in their treatment of marble, but also their ceramic and stone vessels.
The Greeks invented the portrayal of “tragedy and comedy” of humanity in theater, and they dreaded death. They feared the next world of Hades. Their art reflected a disdain for old age and a love of youthful beauty. Notice the Greek statue figures all look young. Even the elder gods like Zeus and Poseidon are depicted older merely by a beard, their bodies still perfectly fit and youthful.
As Diane put it, they were the first in almost everything – from urban planning to art to democracy.
The Romans loved everything Greek. It was Augustus who came and restored the destroyed monuments in Greece and continued the remarkable development in “enlightened” sculpture that took place over just 150 years. The famous Roman athlete discus thrower was a breakthrough technological development in sculpture – to be able to show a figure in action, not flat-footed, in heavy stone.
Sculpture also evolved from showing multiple figures interacting naturally with the Gods, to women like the Caryatides, who were half feminine and alluring, half strong and erect pillars holding up a structure. In some sculptures, the women’s robes are so fluid that they almost look wet and translucent against their skin, of course very controversial at the time.
Partner Archer & Greiner, P.C.
Many of our attendees would rate Ken’s speech as one of the most enlightening of our tour. Ironically it had little to do with Greece or Turkey.
Kenneth, who many call “The Tax Doctor,” has years of experience knowing exactly what triggers the IRS, especially when it comes to asset protection. He practices before the IRS representing clients with sophisticated tax and business planning strategies. He has extensive experience in U.S. tax issues involving foreign trusts and estates, tax planning for dual citizens, green card holders, and U.S. citizens residing abroad.
Ken pointed out that there have been some landmark developments taking place between U.S. government agencies and offshore financial institutions that are still below the radar for most investors.
For one, Credit Suisse recently became the FIRST financial institution IN A DECADE to plead guilty to a criminal charge in the U.S.
A criminal charge brought on against a foreign bank is highly unusual, and so was the $2.6 BILLION dollar penalty charge in the settlement. One of the reasons the penalty was so huge is because Credit Suisse refused to turn over the account holders upon request to U.S. officials. In fact, it even destroyed some of the documents and defended its right to abide by its own privacy rules.
Ken noted that the problem was that Switzerland and companies like Credit Suisse had already agreed to abide by U.S. foreign accounting rules years before.
The IRS is now expanding its scrutiny beyond Europe to Asian financial institutions. It also broadened the language on Schedule Bs (where we declare interest and dividends) so that there are new terms for declaring any financial account offshore, including trusts and any gifts received from a foreign entity.
All of these forces, combined with other big cases against UBS and Liechtenstein, resulted with the creation of the Foreign Account Tax Compliance Act (FACTA) in 2010.
This is still evolving but it is the U.S.’s most onerous “stick” to date against foreign financial institutions. It requires them to report any income paid to a U.S. citizen or resident – or face a 30% withholding tax on its entire source of U.S. revenues. Of course most foreign banks don’t want to spend resources to have to comply with all the reporting measures, so they just close their services to Americans. This certainly makes it hard for any retirees who want to live part time outside the U.S. to open a bank account where they live.
FACTA officially began July 1, 2014. But, there are still a lot of issues and rules to further clarify.
This is why many U.S. citizens and residents may want to hold assets offshore in the non-reportable form (until you sell it and repatriate funds) of metals, collectibles and real estate.
President, AESU Travel
Longtime friend and European travel and lifestyle expert, Austrian-born Fritz Satran was our insider’s guide on this trip.
We have many repeat travelers who know Fritz will create heartfelt and tasteful experiences that they could never get on their own. Fritz always wanted to take us to his “second homeland” of Greece where he spent decades developing hotels, restaurants and group travel packages on the beautiful, quaint island of Poros.
Fritz told us the story of a roadside store sign he noticed when he first came to his current home in Baltimore, Maryland. He will always wish he had heeded its advice: “LIVE LIKE A KING: RENT EVERYTHING.”
He said he learned the hard way that in places like Greece, renting makes you the hero: you are the client. Everyone wants you to spend money there. You bring revenue to their town, they want to make you happy.
If you are an owner, particularly a foreign one, you are the “enemy.” Locals don’t want to cooperate as quickly or cheerfully, especially the officials.
Greek real estate still has problems with titles. These lands go back centuries without official papers to who owns what. And to get anything officiated with any business deal there, you have to be very patient and persistent. Just wait it out. Often, it is he who can keep from getting overly exasperated who ends up getting the deal.
Since most Americans cannot bear eternal back and forth and no forward movement, Fritz recommends RENTING. In the end, it’s a lot cheaper in time and money.
Swiss Asset Manager, Zurich, Switzerland
Rob Vriholf is a longtime friend of The Oxford Club and expert Swiss banking and asset manager. He has a high minimum of $500,000 but will work with Oxford Club Members who want to get started in Switzerland with less. He is registered with the Securities and Exchange Commission in the U.S.
Rob followed up Ken’s speech on the changes in Swiss banking laws and why he advises American investors to be diversified outside the dollar, with a portion of assets in the Swiss franc.
In 1991, Rob co-founded the firm Weber Hartmann Vrijhof & Partners Ltd. His banking career began in 1978 with Union Bank of Switzerland, before working his way through the international securities trading department. Later, with Credit Suisse, he held the senior position of manager of the foreign stock exchange trading section. In 1987, he accepted an offer by Foreign Commerce Bank for portfolio manager. Rob’s profound knowledge in this area soon led to the position of vice president and head of the bank’s portfolio management group. Since 1998, Robert has been on the Council of Experts of the Sovereign Society and has been speaking about Swiss Banking at its seminars worldwide.
Managing Partner, Pekin & Pekin
+90 212 313 3500; firstname.lastname@example.org
Fethi is a leading corporate finance and M&A lawyer in Turkey. He came recommended by a Chairman’s Circle Member and attorney in the U.S. who has worked with him for years. Fethi was educated at Boston University and in the U.K., so he speaks fluent English and Turkish. His firm handles cross-border transactions in a variety of business sectors from banking to media to energy.
Fethi took us on a timeline journey of Turkey from WWI to the present day, where he remains cautiously optimistic…
Turkey emerged out of WWI in great poverty.
Turkey’s “George Washington”– The first president (and hero) of Turkey, Mustafa Kemal Ataturk – led a military victory in the Turkish War of Independence, following the defeat of the Ottoman Empire after WWI.
The sacred name Ataturk – given only to him – means father of the Turks. Once appointed, Ataturk pushed for modern and secular reforms, referred to as “kemalism” today.
Upon the president’s death in 1939, Turkey’s progress stalled until after 1945. Then, Turkey had another period of strong development up to 1960, when it faced decades of destabilization from a series of military coups… first in 1960, then again in 1970 and again in 1980.
In the late ’80s the newly elected prime minister started liberalizing the economy. In the early ’90s, Fethi’s firm assisted in the first privatizations of several large national entities, including structuring a deal with the French to buy six state-owned cement factories. Today they are continuing with these privatization deals. The one on the table right now is a concession to buy into the Turkish National Lottery.
By the early 2000s, GDP was at $250 billion, but inflation hit hard, and the Turkish lira was devalued by 40%. Local interest rates hit 1,000%! A new party came to power but instability persisted until 2002, when the government anchored the currency to the Maastricht Treaty and started keeping a tight leash on the financial sector.
Turkey emerged from its economic mess and the economy started to grow at 8% per year. This is when current “pro-business” Prime Minister ErdoÄŸan started to dominate. The “golden years” for Turkey were 2006 through 2008… then the global recession hit.
But even through the recession, Turkey’s economy grew at 3% and in 2014 should hit 4% GDP growth.
Fethi predicts that Turkey’s economy will grow 5% to 6% on average over the next 10 years. The government’s goal is to make Turkey one of the most powerful economies in the world, with a fully Westernized financial sector.
The key year that everyone is looking at for completion of Turkey’s transition to a leading financial center is 2028. This is “the magic year” to take Turkey from an emerging market to a developed country. It also marks the 100-year anniversary of when Atatuk led Turkey to Independence.
The country only has a short “less-than-a-century” history, and is still very vulnerable. But the last 12 years offer a great success story.
Turkey has lifted restrictions on investments by foreign investors in all but the most critical industries.
There will be fits and starts and setbacks along the way, as there are with all emerging markets.
The “soft spots of our stomach” says Fethi, is instability in the Middle East, and Turkey’s huge trade deficit. It needs to sustain a certain level of direct foreign investments into its industries to make sustainable growth work.
The sectors Fethi sees getting the most direct foreign investment: mostly infrastructure, followed by energy, healthcare/pharma, then IT/telecom.
He said Turks are the highest consumers of iPhones in the world due to the younger population. Always keep in mind that in Turkey, you have an emerging young population of consumers that can now own houses. The government is incentivizing people to own houses with subsidies.
If the country’s economy is going to keep growing, the world cannot be scared away by lack of transparency, corruption and unrest. Instability in the Middle East does dampen trade in Turkey.
Recent corruption and bribery charges against four members of Turkey’s cabinet hit the economy hard. Again the lira fell and the Central Bank had to intervene to stabilize it.
Inflation needs to be kept low. Right now it’s 7% to 8%, but it needs to be 4% to 5%.
Turkey currently has 18 million people and growing. Typical of an emerging country, two-thirds of the population is under the age of 36. They are educated and vibrant and hungry for Turkey to move forward. They want to be the “China” of Europe.
The other two issues weighing on Turkey: the Kurds and Cypress.
In the past, politicians avoided dealing with the Kurds after continued violence nullified several negotiations. But Prime Minister ErdoÄŸan is involved in some “top secret” negotiations and hopes for a resolution. East Turkey continues to be very poor and its citizens are pulled in by the Kurds. It’s very unstable in those regions of Turkey.
As for Cypress, and the two-country division and conflicts it presents, Fethi doesn’t see a resolution any time soon.
Turkey is highly dependent on foreign energy. It purchases $6 billion/year of oil and gas from foreign sources, primarily from Iran, Iraq and Saudi Arabia. Israel has found natural gas and it needs Cypress to transport it. It’s a benefit to both Greece and Turkey to work together to make Cypress a strategic port.
Fethi said it’s hard to know the timeline for resolution for both the Kurds and Cypress, since things are happening very fast in this part of the world.
Fethi noted that Turkey still has to do a lot of homework in terms of democracy and human rights. The Constitutional Court in Turkey is working on new legislation now.
As for the banks, there has been great consolidation since 2002 and the deregulations of the finance sector – 25 banks are now down to just a few. He noted that in Turkey, the banks are inviting depositors to bring in their gold for assessment and storage. They are taking gold as account deposits too, a big business in Turkey now.
Fethi’s view on the current prime minister (soon to be elected president) ErdoÄŸan:
“He’s playing with too many balls in the air. He will inevitably drop one of them.” He said to watch the elections in August to see if the candidates are serious about the deficit.
In closing, I hope you’ve enjoyed this special report on our Financial Discovery Tour through Greece and Turkey. The Oxford Club’s World Financial Seminars invites all Members to join these cultural adventures. We hope you get to experience at least one of them.
If not, look for our full report on the next tour. Next year… we’re heading to Africa. Chances are good that we’ll have several more additional opportunities to discuss when we see each other again.
Here’s to great profits and even greater friendships!
With best regards,
Julia C. Guth
The Oxford Club