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Paul V. Azzopardi  

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  • Dividend Aristocrats: Investing In The Best While Reducing Risk [View article]
    Lowell, a very interesting article.

    What's your recommendation as to how often one should rebalance? That is, run the system again and buy/hold/sell securities?

    Thank you, Paul
    Dec 4, 2013. 04:21 PM | Likes Like |Link to Comment
  • Malta: Another Weak Link In The European Chain Of Tax Havens? [View article]
    News: See the just published Standard & Poor's Rating Direct report entitled "Small Countries, Big Banking Systems: How Malta and Luxembourg Differ from Cyprus", dd 23APR13
    Apr 27, 2013. 01:57 PM | Likes Like |Link to Comment
  • Malta: Another Weak Link In The European Chain Of Tax Havens? [View article]
    I don't think it will help the integrity of the euro if you pick and choose a sprinkling of facts about an EU state and cause undue worry, even though it's not your intention.

    For example, you never mentioned that in the National Bank re-capitalization, not one depositor lost money. Forty years ago Malta was already following banking practices much better than we see now in many other countries. The tradition continues.

    You never mention in your "vacant property" argument that many Maltese own summer houses and apartments which are vacant for most of winter, autumn and spring.
    Apr 4, 2013. 10:00 PM | Likes Like |Link to Comment
  • Malta: Another Weak Link In The European Chain Of Tax Havens? [View article]
    1) So, we've registered some progress because now the EUR7billion figure is no longer relevant. I am glad I persuaded you that far. Next, the good news is that the Chief Risk Officer of the Bank of Valletta wrote you a detailed reply as to the bank's financial position and you can find it here:
    http://seekingalpha.co...
    I am sure that you will find it of interest and that it will help in your reasearch into the facts.

    2)When things go awry with banks - as they did during the financial crisis - shareholders usually lose money. This is what happened in the case of National Bank, if the Central Bank's and the Ministry of Finance claims were correct, and in view of the bank run. Government took the assets, valued them, took over all the liabilities, and injected capital to re-capitalize the new bank. Depositors did not lose money. On the other hand, the way the core countries of the EU dealt with Cyprus forced huge losses on depositors. If you were a shareholder in US and UK banks during the financial crises, as I was, you would have lost money. This is nothing new, and certainly not peculiar to Malta. (As an aside, I really can't understand what is motivating your misinterpretations.)

    3)In my opinion, the "possible problem" you mention lies in how you read the situation, and in how you wrote about it.
    Apr 4, 2013. 09:48 PM | Likes Like |Link to Comment
  • Malta: Another Weak Link In The European Chain Of Tax Havens? [View article]
    (1)Certain expatriates have special tax incentives to relocate to Malta but the worldwide income exemption is not available to all Maltese residents as you stated in the article. The proportion of expatriates to other Maltese residents is very small and their banking impact is negligible - they are very welcome, though, because they are "permanent tourists".

    (2)You again mention the 40-year old National Bank case. I was more into pop and rock music than finance in 1973 but the Central Bank at the time as well as the Ministry of Finance alleged that the bank was being run recklessly, was in clear and present danger of being insolvent (especially when a run on the bank developed) and was "too big to fail". They therefore had no option, in their opinion, but to nationalize it, much as has happened recently, in the UK and elsewhere. Importantly, though, I tell you this: depositors did not lose a single cent and the National Bank's liabilities were carried over to the "good bank". That "good bank" has been very well managed ever since and investors who immediately invested in the public shares offered then In Bank of Valletta multiplied their initial investment many times. (I am a shareholder.)

    (3)The Euro7 billion figure depends on what property one assumes is vacant and how one values that property. Various figures have been suggested - but they usually depend on whether the writer is in favor of the introduction of a property tax or not. In Malta there are no property taxes and that means that anyone reading this can buy a nice house there in the sun and it would not cost anything to keep. Many Maltese living abroad have second houses in Malta and are kept "vacant" for 4 or 8 months a year. In my opinion, property taxes would not be advantageous to Malta.

    Other comments:

    +When property in Malta started to get expensive in the late 1990s a tax on property transactions was imposed, and this calmed the market down so that it rose only moderately after that. With the financial crisis - surely not created by Malta - property prices fell slightly and turnover is now less than it was. This is a natural adjustment, and avoids sharp corrections and surprises. Many people own their own home and mortgages have always been granted very conservatively, for example, calculated for many years on what one of the spouses earns, not on what both earn.

    +The Maltese economy, and even the financial centre itself, is widely diversified. The fact that banking is very active simply reflect the islands' attraction as a moderately-priced, well-regulated, and entrepreneurial financial centre. Switzerland had a huge banking sector for ages and it was and still is one of the most stable financial centres around. Don't you expect more mines in a resource-rich country? It's simply a way to earn money and there's nothing wrong with that, as long as it is done prudently.

    +I am very familiar with Malta and quite familiar with Cyprus - just because they are two islands not far from one another does not mean you can compare them by quoting a few statistics.
    Apr 3, 2013. 10:45 PM | 1 Like Like |Link to Comment
  • Malta: Another Weak Link In The European Chain Of Tax Havens? [View article]
    You wish!

    I answered you fully below.
    Apr 2, 2013. 07:39 PM | Likes Like |Link to Comment
  • Malta: Another Weak Link In The European Chain Of Tax Havens? [View article]
    Please excuse my being blunt, but I have never read a more biased and erroneous account of Malta and its banking than the one presented here!

    The errors here are far too numerous to deal with individually and I will limit myself to the salient points.

    The 15% tax on income mentioned is the final withholding tax on interest earning instruments and certain mutual funds. Maltese residents are taxed on their worldwide income (they only wish they were tax free!). The tax rates on companies and individuals reach a top rate of 35%. There is also VAT and other duties plus strong anti-tax evasion action.

    Anti-money laundering procedures are strictly enforced.

    The 1973 Bank of Valletta case has been subject to numerous court cases. The way you relate the story here is completely misleading. You are jumping from what you claim happened 40 years ago to the Bank today which is very well managed, well capitalized and which, unlike the banks in Cypriot, has a widely diversified portfolio of assets. Most of its assets are business loans and advances to local service and manufacturing businesses and high credit international bonds. Its main competitor is HSBC Malta and they compete head to head on most everything, including balance sheet strength and earnings.

    Among EU states, Malta's fiscal management is very prudent and its financial position is strong. Fiscal deficits and national debt have been within Maastricht criteria for most years.

    What you're saying about vacant property and its valuation is completely misleading. Property is in no way overvalued, that's why Malta attracts expatriates, companies and tourism.

    The financial centre is important, but it is just one industry. Furthermore, no outside nation or group dominates the finances there, as it is said was the case with Cyprus.

    Please check your facts.
    Apr 2, 2013. 07:28 PM | 1 Like Like |Link to Comment
  • Catching A Falling Knife - When And Why You Should [View article]
    I am glad you started your article with how the market behaves in real life because I received a number of emails from theoretical guys (who know a lot about theoretical finance but never actually trade) who told me that the premise of my recent ebook, "Why Financial Markets Rise Slowly but Fall Sharply" is wrong and that markets don't behave that way. To cut correspondence short, I referred them to Apple's (AAPL) recent behavior and never heard back.

    Thanks for starting this article, in essence, with the title of my book.
    Mar 20, 2013. 06:20 PM | Likes Like |Link to Comment
  • Stop Paying Me A Dividend And Start Buying Back Shares [View article]
    Companies lobby for and against a lot of things but they never ever lobby against the additional tax imposed on dividends. This is not surprising since this double taxation of profits serves them well. It is in the interest of management to have an excuse not to pay dividends.

    In Canada, we get a reduction in this second round of taxation imposed on dividends but the lobbying for this reduction was done by an investment manager not by companies.

    If we want to fix this situation, lobbying has to come either from investment managers or shareholders' associations. This is the least legislators can do to compensate for the zero interest rates now imposed on savers and investors.

    Another thing. ROE depends on leverage and comparing PE to ROE is only of limited value, maybe just a prima facie measure. ROE can be pushed up or down just by changing leverage.

    It would be much better to compare PE to Return on Assets (ROA). One must also examine the quality of those earnings, the competitive advantages behind them, and the likelihood that the earnings will be sustained, grow or shrink.

    One final thing: a long time ago I did quite a lot of research on the legal history of dividend distributions and capital maintenance. For many years, it was anathema to legislators and the courts that a company would reduce its capital by buying back its own shares. Surplus profits were distributed to the owners.

    If today's legislators really want the stock market to be an investing machine rather than a casino, they know what they should do.
    Jan 11, 2013. 09:33 AM | 1 Like Like |Link to Comment
  • Eric Sprott: I Think We Are In For A Shortage Of Physical Gold [View article]
    ok, keep ranting
    Jan 5, 2013. 04:16 PM | Likes Like |Link to Comment
  • How Much Longer Can The Fed Maintain A Corner On The Bond Market? [View article]
    The Fed's money printing program should have stopped long ago, and I was not surprised that the first hint of its termination came now, just after the elections. The same goes for other important central banks around the world.

    This is an extreme policy which ought to be used only in the depth of dire emergencies, and used prudently and with caution, and not go on for years as it has.

    ZIRP and QE mess with the value of money and savings, the pricing of everything, the risk premiums expected from bonds and equities, the value of currencies, inflation expectations, you name it.
    If money can be created at will, and therefore has no value, what has value? The answer, of course, would push all non-money assets to bubble heights. Look at where bonds are now, gold, and very soon stocks.

    Such policies as ZIRP and QE might serve the stock market well, in the short-term, and certainly serves the banks perfectly, since they basically directly or indirectly control the Fed and other central banks, but are inimical to good economic policy because they reward debtors and penalize savers and other creditors who made the right choices and not gambled their money on bad loans.

    Ultimately, if central banks are willing to create money to buy all sorts of bonds, thus saving creditors who made bad decisions, a very socially relevant question then arises and the people will ask: why not take me off the hook and pay off my mortgage, why not send me a check at home since I can't find work, why not pay my student loans, why don't you buy my credit card debt? What's good for the goose is good for the gander.

    QE is a very dangerous policy indeed.
    Jan 5, 2013. 11:38 AM | 2 Likes Like |Link to Comment
  • How Much Longer Can The Fed Maintain A Corner On The Bond Market? [View article]
    The Fed's money printing program should have stopped long ago, and I was not surprised that the first hint of its termination came now, just after the elections. The same goes for other important central banks around the world.

    This is an extreme policy which ought to be used only in the depth of dire emergencies, and used prudently and with caution, and not go on for years as it has.

    ZIRP and QE mess with the value of money and savings, the pricing of everything, the risk premiums expected from bonds and equities, the value of currencies, inflation expectations, you name it.
    If money can be created at will, and therefore has no value, what has value? The answer, of course, would push all non-money assets to bubble heights. Look at where bonds are now, gold, and very soon stocks.

    Such policies as ZIRP and QE might serve the stock market well, in the short-term, and certainly serves the banks perfectly, since they basically directly or indirectly control the Fed and other central banks, but are inimical to good economic policy because they reward debtors and penalize savers and other creditors who made the right choices and not gambled their money on bad loans.

    Ultimately, if central banks are willing to create money to buy all sorts of bonds, thus saving creditors who made bad decisions, a very socially relevant question then arises and the people will ask: why not take me off the hook and pay off my mortgage, why not send me a check at home since I can't find work, why not pay my student loans, why don't you buy my credit card debt? What's good for the goose is good for the gander.

    QE is a very dangerous policy indeed.
    Jan 5, 2013. 11:38 AM | 1 Like Like |Link to Comment
  • Eric Sprott: I Think We Are In For A Shortage Of Physical Gold [View article]
    I wonder why they keep digging this worthless metal from the ground and why otherwise sensible people keep paying each other lots of money for the privilege of holding it.

    Institutions like central banks are always last to enter and last to exit because it's more important for their management to look right than be right.

    The best thing central banks can do is take care of the value of the fiat money they've been entrusted to protect, not do their best to generate inflation and then hide behind this relic.
    Dec 25, 2012. 02:07 PM | 1 Like Like |Link to Comment
  • Buy And Prosper: 4 Reasons Why Buy And Hold Is The Best Strategy For Most Investors [View article]
    A very good piece which cogently sets out the case for what's called "dividend investing" with its bedrock principles of first assessing the sustainability of the business model, cash flow, growth and managements' shareholder friendliness and integrity.

    If more investors had the attitude demonstrated in this article, the stock market would be much more of a business machine than the roulette it's been turned into.

    How companies behave often depends on shareholders' expectations and the standards investors set. Short-termism gets more short-termism, a long-term perspective gets long-term wealth.
    Dec 13, 2012. 09:27 AM | 2 Likes Like |Link to Comment
  • Are Market Valuations Plausible, Or Short Of Silly? [View article]
    The way I see it now, in spite of QEinfinity and a likely slow recovery, we're unlikely to push thru' the 1600 level on the S&P500 easily unless Europe and/or housing and/or China take off strongly. The market is likely to have recently over-reacted and I would not be surprised if it corrects significantly in the next few weeks, providing investors with better opportunities to invest. Let's say, "plausible but stretched."
    Sep 28, 2012. 10:48 PM | 2 Likes Like |Link to Comment
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