Investment Outlook

Investment Outlook third quarter 2016



“You’ve heard of the golden rule, haven’t you? Whoever has the gold makes the rules.”
from Disney’s Alladin

The defensive portfolio positioning has been helpful to overcome the volatility in the financial markets after the outcome of the British referendum. The initial downward reaction of share prices has been more than offset by the strength of bonds, gold, the U.S. & Singapore Dollar, Swiss Franc, Scandinavian Kroner and the good performance of defensive stocks, thanks to which the Laaken investment portfolios showed positive performances at the end of the first half of 2016.

We feel that the economic impact of the outcome of the referendum will be limited, except for Great Britain,  because of the fact that Great Britain is just 2% of the world economy and the present size of her economy is now only equal to that of France. Similar to Norway and The Netherlands, Great Britain benefitted from the discovery of and gas since the seventies; contrary to Norway, both The Netherlands and Great Britain consumed this windfall almost entirely. Thanks to the reforms implemented 30 years ago by Margaret Thatcher, the British economy has since then witnessed a long period of economic recovery; 20 years ago the long decline of the Pound against the Euro/DEM of about 70% since the end of WOII, came to an end. Partly due to the created tax benefits, London became a magnet in Europe and the world which lead to a real bonanza in the property market there. This speculation drift came abruptly to a halt since June 23rd, the Pound fell since then by 13% versus the Euro, listed U.K. property companies lost about 30% of their value and six U.K. money managers closed their open-end property investment retail funds for redemption this week, with a combined value of about 13 billion Pound.

Many clients on the European continent are served by financial institutions, law firms and consultants in London. However within the EU a so called European Passport is required for some of these activities. Now that Great Britain has chosen to exit the EU, part of these activities and investments will be moved to EU members on the European continent and Ireland, including EU supervisory bodies, now located in London. It is for instance interesting to observe how embassies are opened and expanded at the moment in Berlin. In the years to come Westminster will no doubt suffer under the complex, endless unwinding out of the EU and the renegotiations of countless global treaties. It is important to realize that Switzerland and Norway fare well with their, although different, associated EU memberships. The outcome of the Spanish general elections, the Sunday after the U.K. referendum was held, was quite different than the media had ‘forecasted’. Apparently Spanish voters must have been aware of the advantages of their EU membership, after the disenchantment of the Brits.

With versus low and negative interest rates in Europe, European stocks currently show a gross dividend yield of about 3.9% on average. This difference in yield is now bigger than during the market collapse in 2008. In the U.S. and Japan these figures amount to 0.7% and 2.5%; hereby it remains attractive to be invested in shares of defensive listed companies.

Recently Dutch banks lowered their credit interest on current-account balances to 0.4%, still 0.8% above the European Centrale Bank rate of minus 0.4%. It seems a matter of time until Dutch banks will no longer pay such interest to their clients and perhaps, as in many other European countries, will be charging clients negative rates instead.

Investment strategy

Recently the allocation to listed property had been increased somewhat and the position in Palladium was switched into shares of Royal Gold Inc., a gold royalty company. Risks related to the stagnating Chinese growth remain, as well as the delays of the necessary restructuring of European banks. As a result, a conservative investment approach remains in place.



Because Japan is the third largest economy of the world and home to many leading and innovative multinationals, we are keen to invest in Japanese equities. At the same time, it can be difficult to find Japanese companies that meet our selection criteria. With our recent purchase of Nintendo, known for games such as Mario, Pokémon and Zelda, we believe we have added a Japanese company to our portfolio that meets our quality requirements. 


For every share that we buy and sell for our customers, a commission is paid to the broker, which in most cases is the custodian bank. For them, these commissions are an important source of income. Because this is an industry that we deal with every day, we used our first-hand knowledge when we selected a broker as a potential investment last year. We took a position in a company named Interactive Brokers.