I was chatting with a pilot friend who returned to his native Germany recently and reported that he’d been unable to get into restaurants. “They refused to accept my CDC card as proof of vaccination,” he said, “because they said it was too easy to forge one.”
I mentioned this at a pilot gathering in Palm Beach and one of the guys at my table said, “the same thing happened to me in Switzerland. Nobody would accept the CDC card.”
What papers do you need to show? “It’s called a European vaccine certificate,” my German friend explained. “You get this from a pharmacist [QR code with some text] then load in app or if you are old show on paper. It’s tied to a Europe-wide database and issued by the local CDC equivalent. It can only be put into the database by authorized pharmacists and some other designated officials, but not doctors.”
So enjoy your trip to Europe, but if you got vaccinated in the U.S., don’t plan to be indoors at museums, restaurants, etc.
If you want some insurance against future Europe-US travel restrictions, want your children to have the flexibility to study/work/live in the EU, or just want to be like Eric Schmidt (support Biden and the Democrats’ plan to re-make U.S. society and the U.S. economy, but have the Gulfstream fueled and that second passport handy just in case!), the Portuguese Golden Visa program is an inexpensive path to an EU passport (less than $100,000 in fees and travel expenses). One requirement of the program is investing in real estate, which the Portuguese love and which I personally hate, or stocks, which the Portuguese hate and I love. The stock purchase approach requires more capital (1 million euro, versus as little as 280,000 for real estate that needs renovation), but is virtually guaranteed to be liquid.
Friends of friends manage money or work in investment banking over in Europe. The general consensus was that Portuguese stocks aren’t mispriced and therefore there is no reason to expect them to do worse (or better) than German or U.S. stocks. That said, the stock market isn’t very developed in Portugal and it is perhaps easier for a management team to loot from shareholders.
Here are some notes from a guy who grew up in Portugal, but has spent his career as an investment banker in London and Spain….
Don’t buy real estate unless you want to use it. He bought in the center because he is fanatical about capital preservation. It took a long time to unload an apartment in Lisbon after the last crash.
Why has PSI-20 done so badly? Had same problems in 2001 and 2008 as everyone else. Bank blew up in 2014. Should be correctly priced now. They’ve survived hell and high water.
The PSI-20 has more exposure to Poland than Brazil or Angola, e.g., through JMT.
You’re in great shape with the large liquid components of the PSI-20.
JMT (10, great management, high growth) [the number is a rating from 1 to 10]
EDPR (world’s leading wind farm developer, incredibly management)
EDP (owns 65% of EDPR, cheapest right way right now to own EDPR)
GALP (4, local distribution company for oil, invested some into oil fields in Brazil, Angola, Mozambique, not especially well-managed)
BCP (6, only remaining bank, not especially well-managed, dirt cheap, too big to fail for system, largest shareholder is Chinese)
RENE (5, just the grid, regulated business, natural monopoly for electricity and gas, yield play)
SON (1, conglomerate, screw the minorities every single time, subsidiary is NOS and own that)
NVG (integrated paper manufacturer, Europe’s leader, very good management, very well run)
COR (10, one of the best companies I’ve ever come across, 50% of good wine[ry?])
ALTR (8, indirect way of owning, one of Europe’s most efficient [… something?])
CTT (6, post office)
SEM (85% of value is navigator, forget about them)
EGL (avoid)
PHR (avoid)
IBS (very nice company, KFC and Pizza Hut, they can grow)
Novabase NBA (great company, small IT provider, all software for Vodaphone, half of market cap is cash)
RAM (specialized steel and have a forest, properly managed and managed for you).
What if the Portuguese bank holding one’s securities fails? It is just like in the U.S. and the bank is only a custodian.
What did I decide to buy?
Company
Symbol
Weight PSI-20
Percent portfolio
J. Martins
JMT
13
25
EDP
EDP
12
20
Corticeira
COR
4
17
Navigator
NVG
6
10
Altri
ALTR
4
10
Ibersol
IBS
1
10
Novabase
NBA
0.5
5
Ramada
RAM
0.3
3
The above is based on personal prejudice against banks (ruled out BCP), enthusiasm for Poland (overweight JMT), enthusiasm for electricity (overweight EDP; think of all the European douchebags needing to charge their Teslas!), belief that people are too lazy to cook and that table-service restaurants are unsustainable in a world of COVID-19 plus high labor costs (IBS).
Due to prejudice (observing the USPS!), I didn’t buy the post office, which is sad because they have great-looking trucks:
(2017 photo from the Azores)
Readers: Let me know if you need an introduction to attorneys and bankers over there.
After 16 years of rule by Angela Merkel and the Christian Democrats, the government in Germany is changing. I talked to some European bankers and a former hedge fund manager to find out what, if anything, investors should do about this.
The general consensus was that very little would change in Germany. As in the U.S., grand plans from a party can be derailed by an individual member of parliament who thinks that the grand plan will have a negative impact on his/her/zir/their own little corner of the country. For better or worse, this tends to make the German system stable.
Nobody said that Merkel would be missed. One banker pointed out that Merkel was likely voted out by the low-skill welfare-dependent migrants that she was instrumental in bringing to Germany (welfare in Germany is much less generous than in the U.S., but still leads to a better material lifestyle than trying to work for a living in a lot of countries). “They’re betting that the Social Democrats will increase the handouts,” he said. “The conservatives bring them in saying that they’ll work and they turn around and vote for liberals so that they don’t have to work.” (After five years in Germany, about 51 percent of migrants don’t work, which is considered an improvement and a success story by pro-migration Germans.)
Another banker said that Merkel was responsible for the UK leaving the EU. “The British could have just ignored the EU’s demands to accept migrants, as the Eastern European countries did, but they’re too bound up in being law-abiding,” he said. “The Eastern European countries just refuse and dare the EU to throw them out, but there isn’t really a mechanism for kicking a country out of the EU.”
The former hedge fund manager said that Merkel was an unprincipled follower of public opinion. While she initially told Germans that most would be infected with SARS-CoV-2 and therefore most resistance would be futile (e.g., masks and shutdowns would just slightly delay the inevitable), when people demanded lockdowns she locked them down.
Headline inflation came in at 3.4% last month, according to preliminary data from Europe’s statistics office Eurostat. This was the highest level since September 2008 when inflation stood at 3.6%. It comes after German consumer prices rose by 4.1% in September — the highest level in almost 30 years.
The rise has been driven higher by surging energy prices, deepening concern among policymakers. The front-month gas price at the Dutch TTF hub, a European benchmark, has risen almost 400% since the start of the year.
What’s more, this record run in energy prices is not expected to end any time soon, with energy analysts warning market nervousness is likely to persist throughout winter.
France has become the latest country to step up measures to mitigate the costs for consumers. Prime Minister Jean Castex said Thursday the government would be blocking further natural gas price increases as well as rises in electricity tariffs. However, before these measures kick in, gas prices will rise by 12.6% for French consumers as of Friday.
I asked the hedge fund manager if the European inflation numbers were cooked like the U.S. numbers (e.g., food and energy costs are excluded from some measures, the cost of buying a house is excluded from all measures (the government comes up with a fictitious world in which people can rent their houses from themselves for a government-determined price)). “Completely fake of course,” he responded. “However, there is one reality of their own making. To ‘save the world’ (read: tax more) they recently yanked up taxes on natural gas and the such. Together with rising oil prices, this has created quite a bit of inflation as you can imagine.”
If the Europeans are inflating away the value of their currency just we are inflating away the value of ours, what is an investor to do? Move money to China, as BlackRock has recently started to do? That’s a bridge too far for a lot of non-Chinese investors. How about “Mining Stocks Offer a Cheap Play on Growth. Dig In.” (Barrons, September 17, 2021), in which we learn that iron and copper miners have P/E ratios of 5-7 (compare to over 30 for the S&P 500):
We have no idea where the euro and dollar will be after the politicians on both sides of the Atlantic are done with their manipulations of the respective economies. I’ve always hated gold as an investment because it isn’t productive. And, in fact, once you factor in dividends paid (“total return”), gold has underperformed U.S. stocks going back to the beginning of our galloping inflation (1971):
(black is the total return; silver is bumping along on the bottom; the S&P (without considering dividends), the Dow Jones, and gold are clustered in the middle)
Could mining iron and copper be considered a hybrid of gold’s inflation hedge and the return to be expected from investing in a productive activity? People will still need steel even if there is a lot of inflation in one or more currencies. On the third hand, aside from the low P/E ratio, why are raw materials miners better investments than upstream manufacturers? And if the P/E is 5 or 7, is that because a company is heavily indebted and can go bust (rather than simply slim down) in the event that demand is reduced?
Related:
“Nobody Really Knows How the Economy Works. A Fed Paper Is the Latest Sign.” (nytimes, October 1). My summary of this plus the rest of the nytimes: Since even the smartest and most expert experts have no idea how the economy works, it makes sense to have the government move in and manage a much larger portion of it.
As readers may have noticed, I’m a contrarian when it comes to COVID-19 (along with the 60,000 physicians and PhDs who’ve signed the Great Barrington Declaration). To me, the untested “experiment” is locking a country down and closing schools in hopes of winning a war against a respiratory virus. It is not an “experiment” to stay open, as Sweden did (and as the W.H.O. recommended through 2019), and continue to educate children, continue to go to work, continue to hit the gym, continue to socialize with friends and family, etc. I don’t think the U.S., for example, will be better off as a result of shutting down, closing schools, buying and wearing cloth masks that have been shown to be worthless, etc. I do think the Swedes will prosper in the long run due to superior mental health, a focus on something other than COVID-19, their kids having an extra year of in-person school compared to kids in U.S. cities, etc. I want to invest in Sweden with a 10-20-year horizon.
(Based on our devotion to the Vietnam and Afghanistan wars, we could still be fighting the COVID-19 war 10-20 years from now! Even if we aren’t, the misallocation of $trillions from the past 1.5 years, e.g., paying people to stay home for 1.5 years ($800 billion just from federal tax dollars), giving $3,600/year extra per child to successful child support plaintiffs, funding highway repairs in the least efficient states (the new “infrastructure” bill, which builds infrastructure everywhere other than in the states that actually need it due to growing population?), etc., will be a comparative drag on the U.S. economy.)
What’s the best way to invest in Sweden? My usual preference is for common stocks, but apparently a lot of these can’t be purchased in the U.S. There is an ETF that tracks the Swedish market: EWD from iShares. The dividend yield is medium (just under 3%), which I hope means that capital appreciation is expected. Somehow, 77 percent of the yield is classified as “qualified” (I’d thought that this was for U.S. stocks) and therefore subject to a lower federal tax rate (if the Democrats are successful with their latest federal tax increase, the result will be a dividend tax rate of about 50 percent for Californians (fed+state) and this will be on top of higher corporate taxes (i.e., something like 75% of a company’s profits that would have belonged to shareholders will instead go to pay taxes); things are a little less grim for residents of Florida).
The big negative of this iShares fund is a 0.51 percent management fee. They’re just trying to track the index, so it is unclear what you’re paying them for (how hard is it to buy and hold 53 stocks?). The fee for the Vanguard S&P 500 ETF is 0.03 percent, which is also the fee for the corresponding iShares S&P 500 ETF.
The big negative of Sweden as an investment, if you’ve been reading this blog, is that I don’t believe the prevailing American dogma that low-skill migrants make a country richer (if they did, Canada and European nations would be vying for and paying for the opportunity to fly low-skill migrants from our southern border to their respective countries). At 25 percent, Sweden has, I think, the highest percentage of immigrants or children of two immigrant parents, of any country in Europe. If these folks prefer not to work, that could be a drag on the Swedish economy (via welfare costs) for the next 100 years. See “‘New Swedes’ left out as economy powers through pandemic” (Reuters, March 17, 2021):
Sweden has powered through the COVID-19 crisis with an economy set to regain its pre-pandemic size by late-2021, but a surge in unemployment among its foreign-born citizens risks exacerbating social divisions for years to come.
Ajlan came to Sweden as a 17-year-old from Baghdad in 1993. Despite graduating with a degree in Middle Eastern Studies from Lund University – one of the country’s best schools – he only found work as a taxi driver.
A rigid labour market and a lack of low-skilled jobs means Sweden has been poor at integrating waves of immigrants, or “new Swedes”, since the 1970s – a social and economic divide that has been widened further.
Unemployment among foreign-born workers stood at 18% in the fourth quarter of last year, up 3.5 percentage points from a year earlier, according to Statistics Office data. For people born in Sweden, it was 4.1%, up just 1 percentage point.
Immigration has been running at high levels for the past two decades in Sweden, with a record 163,000 asylum seekers arriving in the country of 10 million in 2015.
The government has launched a raft of measures – some of which predate the pandemic – aimed at getting people into work, including subsidized employment, tax breaks for employers, on-the-job training schemes and its “knowledge-lift” programme that offers study opportunities for the unemployed.
In other words, the Swedes don’t have any better idea of what to do with low-skill migrants than we do. They’re on the same “provide free housing, free health care, free food, and then ask people nicely if they would like to work” plan (maybe the Swedes don’t offer an Obamaphone, but mobile phone service in Europe is much cheaper than in what we call our competitive market).
On the third hand, the U.S. and all of Europe are going to be packed with low-skill migrants for the foreseeable future. The only way to short the idea of a migrant-packed welfare state is to invest in Asian countries that are closed to low-skill immigration and that, in any case, don’t offer the multiple generations of free housing, health care, and food that the U.S. offers and that some European countries offer (albeit at a less generous level; see Hartz IV in Germany, of which 55 percent of the recipients are migrants or children of migrants: “According to the Federal Employment Agency … this was due to the migrants lacking either employable skills or knowledge of the language”).
Vaguely related… the Volvo-driving migrants arrive in Stockholm on the ferry from Finland (2016):
UK Prime Minister Boris Johnson’s plan to hike payroll taxes to raise billions in funding for health and social care will raise Britain’s tax burden to its highest ever level, according to the Institute for Fiscal Studies.
Johnson described the plan as “the biggest catch-up program in the history of the [National Health Service],” which is grappling with a chronic backlog of non-essential treatments that has been made worse by the coronavirus pandemic.
UK government spending coming out of the pandemic is set to reach a record peacetime level, according to the IFS.
What are folks in the UK paying for? In the COVID Olympics, the country has suffered 1,992 deaths per million tagged to COVID-19, a somewhat higher rate than the U.S. and 1.4X the rate in give-the-finger-to-the-virus Sweden.
Proof that “A government big enough to give you everything you want is a government big enough to take away everything that you have”?
Where does this end? Now that most people in most countries have begged for salvation at any price (and simply decided, without any precedent and contrary to W.H.O. pandemic advice through 2019, that muscular government action actually could prevent us from contracting a respiratory virus), are we going to enter a new era of much bigger government?
OECD data show that the UK government was previously spending a somewhat higher percentage of GDP than the U.S.:
Note that most countries include health care in “government spending” and some include nearly all higher education costs. If we add 10 percent of GDP to the headline U.S. number to adjust for these factors (i.e., the money that we have to spend on health care and higher ed privately that would be included via our tax bill, e.g., in Denmark), the U.S. government spending is about the same as in Sweden or Italy (and a larger proportion of the economy than in the U.K., even after Boris Johnson’s latest raid on the residents).
Same story, WSJ:
Related:
Wave of death among the elderly bankrupts Social Security (if governments and media are telling us the truth about COVID-19 killing reasonably healthy people, governments with big social insurance obligations, such as the UK and the US, should actually be flush with unexpected cash (due to beneficiaries having died 5-10 years prematurely))
Sweden currently has Europe’s highest COVID-19 “case” rate, but a fairly low COVID-19 death rate compared to other European nations.
One of the interesting charts is “population-weighted density” (i.e., how dense is the average person’s neighborhood in Sweden compared to other countries):
Swedes are actually packed together more tightly than Germans, despite Swedish ownership of a big area of uninhabited land up north.
What about Stayin’ Alive, the thing that most of us insist on doing even when the other 8 billion folks on the planet say that we wouldn’t be missed?
Even in 2020, the Swedes had a low rate of excess deaths compared to other European nations of similar density (see above). The Swedes should also have a lower rate going forward because they didn’t have a 15 months of lockdowns in which people were unable to exercise and maintain mental health. And they didn’t lose as much economically, which means they’ll have better public health going forward (since they won’t have impoverished themselves the way that other European nations did):
None of this will convince Church of Shutdown members, of course, but I thought readers might be interested to see these data from a 200-year-old current affairs magazine. And maybe it is time to buy Swedish stocks! Unless Nature runs out of coronavirus variants, it seems safe to assume that this coming fall will feature soul- and economy-destroying lockdowns in many countries while Sweden remains open.
At least to judge by our media, the U.S. is embroiled in white v. Black, white v. Asian, white v. Latinx, and hetero cisgender v. LGBTQIA+ fights. We’re also adding $trillions in debt, welcoming millions of new welfare-dependent citizens, and instituting dramatic changes in government (every day we hear a new and exciting idea for a bigger more powerful central government!). It seems like a good time to ensure that children have the option to study, work, and live in Europe. The Europeans bumped up against the limits of how much government could be responsible for and don’t seem anxious to go back to the 1970s.
There is no way to predict whether Portugal, Italy, Germany, France, or Sweden will be a better place to live than the U.S. in 2030, but keeping only a U.S. passport is essentially a bet that the U.S. will be a better place to live than anywhere in the E.U. Would we want to make that bet?
Portugal operates a “golden visa” program in which folks who purchase real estate (500,000 euro) or invest in Portuguese stocks and bonds (1 million euro) can obtain citizenship after five years of periodic visits (roughly one week per year) and demonstrating a reasonable command of the language. After a passport is obtained for one or both parents, children can then get Portuguese citizenship as well. Then they can hang out in the wonderful Azores or the historic cities of the mainland and wander at will among the rest of the EU nations.
The most obvious place to purchase real estate is Lisbon, but the property market could be vulnerable to a crash since it has been pumped up by all of the other folks purchasing real estate to meet golden visa requirements. There are some developers who promise to pay 3-5 percent as an annual return for anyone who buys an apartment in one of their buildings, but obviously they won’t be paying if they run out of money after a collapse.
I’m wondering if it is safer and simpler to purchase Portuguese stocks, of which there are only 56 currently trading on Euronext Lisbon. The PSI-20 consists of the 20 largest stocks. A March 2021 Factsheet shows a P/E ratio of about 18 and a dividend yield of 3.63 percent. The big components seem to be energy companies and utilities, retail, and a bank (i.e., fairly conservative investments and maybe not a terrible hedge against U.S. stocks). The PSI-20 does not have a great track record. It is a good thing that there are dividends because the price is quite a big lower than it was in 2010:
I’ve never liked real estate as an investment, especially for a foreigner. You have to trust a city, a neighborhood, a developer, a building, etc. But folks in countries that have had a lot of economic ups and downs love real estate! They also like bonds, but right now yields are minimal (see “Portugal Sets Precedent with Near-Junk Bonds That Yield Nothing” (Bloomberg, December 2020))
European readers: What do you think?
American readers: send me an email if you want to copy this idea. I have found some attorneys that seem reliable (referred by a major international bank). There are some ways to do this with a capital stake of only about $350,000.
“Golden visas to be scrapped for Lisbon and Porto” (starting in 2021): S… the PS parliamentary group decided it was time to address the galloping property speculation that golden visas have generated, as well as try to dynamise ‘poorer regions’ where people could do with increased job opportunities.
“Call to rent out vacant golden visa homes” (March 13, 2020): In the motion signed by the BE councillor in Lisbon, Manuel Grilo, to which Lusa had access and which should be presented on 12 March, in a private meeting of the municipal executive, it is defended that the municipality urges the Government “to proceed with the survey of vacant properties acquired in connection with the granting of gold visas”. In addition, and under the current legal framework, “the requisition mechanisms for public purposes must be considered in order to reinforce the housing supply in the municipality and, in such cases, define the obligation for these properties to be leased, within the scope of the Affordable Income Programme”. (If the U.S. government, via the CDC, can order an eviction moratorium for more than a year surely the Portuguese government could issue regulations around how these apartments are to be rented.)
Mrs Merkel sounded the alarm on Tuesday after announcing tough new restrictions including a lockdown over the Easter holiday.
“We basically have a new pandemic,” Mrs Merkel told reporters in Berlin in the early hours.
“Essentially we have a new virus, obviously of the same type but with completely different characteristics,” she added.
Unless the coronavirus gets the memo about evolution being only a theory, Coronapanic now, coronapanic tomorrow, coronapanic forever?
(Note that Angela Merkel has a Ph.D. in quantum chemistry, but the misogynists at the Evening Standard call her “Mrs.” and not “Dr.” as would befit a colleague of Dr. Jill Biden, M.D., Ed.D.)
A late-1990s photo from Munich. Note the cultural appropriation (“Chinesischer Turm”) and the sitting ducks for a respiratory virus.
From the same trip (visit to Siemens, a major adopter of our ArsDigita Community System software), tourists try to cram themselves into Neuschwanstein.
Looking at these photos how humans used to behave, what is most shocking is that viruses didn’t drive us into our bunkers centuries ago.
I’m sure that we can all agree that the working class in Britain shot themselves in the feet by not listening to the elites when it was time for the 2016 Brexit vote. Now that we’ve learned more about science and realize that the only important function of a government is protecting subjects from COVID-19 (corollary to the only important function of a human being to avoid coronavirus infection), let’s look at the vaccination rate in the UK (18 per 100) versus the abandoned EU (4 per 100):
In light of these data, when would be the optimum time for the Brits to rejoin the EU?
“Solidarity Is Not an Easy Sell as E.U. Lags in Vaccine Race” (NYT, today): There is no doubt that the European Union bungled many of the early steps to line up vaccines. It was slower off the mark, overly focused on prices while the United States and Britain made dollars and pounds no object, and it succumbed to an abundance of regulatory caution. All those things have left the bloc flat-footed as drugmakers fall behind on their promised orders. But the 27 countries of the European Union are also attempting something they have never tried before and have broken yet another barrier in their deeper integration — albeit shakily — by choosing to cast their lot together in the vaccine hunt. With just over 3 percent of E.U. nationals having received at least one dose of a vaccine by the end of last week, in stark contrast to Britain’s 17 percent and the United States’ 9 percent, nowhere does the lag sting more than in Germany, the bloc’s biggest economy and de facto leader.
From a Dutch university professor: “The Nazis got tired of digging graves for people they’d shot, so they figured out that they should make them dig their own graves first. It’s the same strategy governments have pursued with lockdown. Make people work to pay for their own cells. It’s not Arbeit macht frei, but Lockdown macht frei.” From my 1999 trip to Dachau:
IMG0044.PCD
Governors and public health officials in the U.S. work together in the same ways as the medieval prince and priest: “You keep them stupid and I’ll keep them poor.”
Aside from politicians and the billionaires, who has done well in West’s Year of Lockdown? “It’s been a Godsend to the sad and lonely. The West has been the center of family disintegration and there are more people living alone than at any other time or place in history. The sad and lonely are not any better off, but everyone else has been dragged down to their level.” [Divorce lawsuits are more lucrative in the U.S. than in Europe and, perhaps not coincidentally, the U.S. is statistically more disintegrated than any of the European countries.]
How about the college students? Are they rioting? “They’re used to having a world imposed on them by Baby Boomers, so it doesn’t occur to them that they can object. They’re having parties in basements and trying not to get caught.”
Unlike Maskachusetts, the Netherlands allows residents to roam outdoors without masks. My friend goes to a private riding club in which the government cannot require masks. “If it were a public for-profit club, they would be subject to the mask law,” he said. Executives generally cannot issue orders that eliminate citizens’ rights, but the parliament can meet expeditiously and change the law, which it has done.
What has muscular government action in the Netherlands accomplished? A similar-shaped profile to masked-and-shut UK or US and also similar to unmasked and un-shut Sweden:
“About half of the older people still believe that masks and lockdown can save us,” he said, “but the other half are disillusioned by the continued epidemic.”
