Finance/Investment

Good luck to Bulgaria, they've just secured an investment from a Chinese car company to make a bunch of Chinese brand cars for sale throughout the EU... yeah I'll be interested to see how this works out for them.

In the BBC articlethey make a big deal of the Chinese copying the Japanese and Koreans and exporting to Europe and the US because that is where the money is. Either that is a sad indictment of our society that cars are perceived to be more important than other things, or our public transport infrastructure is so poor that people are forced to buy cars.

Either way I think the Chinese are just doing what is logical for any business looking at markets to promote their products. I don't agree with their goals, I think there are already too many large corporations in the automotive space producing vehicles that are all more or less similar to their competitors, and if the Chinese are going to export I'd prefer they don't bring old technology into Europe that we already have too much of.

Wouldn't it be great if instead they'd be clever about their manufacturing and leapfrog the western economies with electric vehicles, self driving vehicles, shared ownership vehicles etc? Oh well, that's my rant for the day.

A while back I lived in the States before coming to Spain, as well as the UK, and I still do business there, which is a hassle considering all three have their own currency. Living in the Eurozone makes you realize how much of an advantage it is to have a common currency, even if the language and laws of neighbouring countries aren't the same. Financial crisis aside, the convenience of being able to wire funds to another EU nation without currency exchange rates is a huge plus.

However, since I frequently have to trade in other currencies, I keep my broker and bank website bookmarked, but I don't need a ticker for up to the minute rates, so checking once a day is usually sufficient, and for casual lookups I often just go to FreeCurrencyRates.com and use their converter, which uses ajax to give an instant conversion instead of having to click go or submit and then wait a few seconds for the page to refresh. That for me is the biggest problem with other online converters, and also most have small fonts, are fiddly to use, and seriously, why do I need to click submit.

Check out the Free Currency Rates Online Currency converter app to see the difference. No need to download anything, no software to install, in fact it's completely anonymous to lookup a conversion. I don't even see any sales pitch and that is rare. A nice touch is being able to switch language, so if I'm with a client who only speaks Spanish they can easily choose one of the other currencies based on the translation. Here's a simple example of what I mean, the US dollar is called "Dólar estadounidense" which is exactly what a Spaniard would call it since they don't say USA, they say EE.UU.

Well it looks like Spain really is in for rough times if the best economist our new government could find to be Economics Minister is also a former executive for Lehman Brothers.

Call me a cynic but when a bank fails so spectacularly, it usually means the people at the top weren't very competent, and that doesn't bode well for the next four years in Spain if we have an Economics Minister who learned his craft from those sorts of people.

So what can we expect to see happen here in the next year or so? Well we've already got a commitment from the government to increase IVA (the Spanish version of VAT), and we know Rajoy wants to reduce the deficit by 16 billion euros. It doesn't take a rocket scientist to realise that has to come from the biggest parts of the budget, health and social services.

I believe we may be in for a rough ride next year, perhaps a lot of anger will erupt in the streets with protests that will be bigger than the 15M movement managed to raise, and maybe national general strikes that could see blockades of our roads and ports.

The government response will be to crack down hard where they can, and I believe we could see a lot of riot police on the streets, just like they did in Greece. To be sure the Spanish enonomy isn't dead and buried yet, the country isn't a basket case, but a lot of people are really feeling the hurt and they might not be so supportive of a former Lehman Brother's executive in charge of the economy.

A couple of days ago I was chatting to a friend in LA about property in general, and she mentioned the prices of homes in LA compared to Denver, which led to me mentioning prices of European property, specifically in Spain and Germany, the two markets I know the best.

The conversation rolled around to short sales, because any investor worth their salt will be looking for short sales if the price is right. Flipping in this market isn't the goal, instead its to build a portfolio of rentable property on the cheap.

In Spain there are some bargains to be had, at least in Spain we think they are bargains, for example pisos (apartments) of 100sqm selling for 60-70k euros that can be rented for a minimum 450 euros per month in the small towns, or as much as 700 in the bigger towns. In the big cities you won't find property at these prices where the rent can be higher.

Contrast this with a recent short sale in Denver, 100sqm condo for US$20,000, and possible rentable income of US$1,000 per month. Wow, for an investor I'd love to be the buyer on that property. Sure taxes and other costs aren't the same between the US and Europe, but it doesn't take a genius investor to know that property in Denver with the right numbers could pay itself inside two years, whereas in Spain you'd be looking at ten+ years.

Cashed up investors complain about the property market going nowhere, but I'm looking for these kinds of opportunities. To get something of an equivalent price in Spain I'd need to look at rural property, what we call fincas here, which will probably be an acre or two with a stone barn that could be converted if the legals work out, and if I hunt around I could pick that up for less than 20,000 euros, but it would be far from useful as a rental, in fact probably too far from town to even bother.

The US economy may look like its tanked, but don't write it off yet, with 300 million people there is always going to be demand for real estate, the secret to working through the current crisis is to invest for the long term, flipping isn't going to work so look at the rent income vs buy price to see which property is going to be an asset to your portfolio.

The recent problems in the real estate industry have been building up for quite some time so shouldn't have surprised anyone, but sadly they did with the result millions of homeowners have lost their biggest investment, but the market isn't all doom and gloom, in fact within some segments there is still demand, and profit to be made albeit less than in previous years.

Outside of China, the most significant real estate market in the world is still the USA, and anyone who wants to invest in property will likely still have an interest in this market. Successful investors tend to look at markets a little less emotionally than homeowners, and those in the know will tell you the United States still has many exciting opportunities, including some that are green field, though most are continuations of existing developments.

One that interests me a lot is the recent shake-up of US military bases (termed the BRAC base realignment) because there is enormous potential for good rental returns outside of expanding bases for military personnel who prefer the independence of off-base life, as well as the contractors who inevitably get drawn to these installations like moths to a flame. Read More