Quotes And Portfolios

Maltastar  

May I propose readers three quotes from my Maltastar articles published between March and May 2002.

Can the EU save them? (maltastar.com- 25 March 2002)

So the most likely scenario is that the PN strategists will go for a referendum as early as possible in the new year which is likely to be mid-February 2002. The PN strategists hope that if they carry the referendum they would have wounded Labour to a sufficient extent as to be able to perform acceptably in the March 2003 local elections, and then proceed to a general election before the onset of Summer 2003

With the generous funding given to MIC (which no doubt would be again increased in the 2003 budget) and the EU structures available to the government, including regular influential visitors who repeatedly tell us how much the grass is greener on the other side of the fence, the MLP will be hard put to match the media challenge for the referendum. And with the Broadcasting Authority reduced to a PN lap dog forgetting its constitutional obligation for media balance on matters of national political controversy, the PN strategists have good reason to feel confident that the EU referendum could be the lever to change their fortunes from the certain doom which would normally await them in the following electoral tests.

There is also the shared feeling that floating voters, general unhappy with both political parties, would be more likely to vote for EU membership as a sort of imposed discipline which our political system has denied us since Mintoff achieved his life-long ambition on 31^st March 1979 and started behaving like a rebel without a cause.

Referendum Dishonesty (maltastar.com- 22^nd April 2002)

The government wants to have the referendum just before an election as a political tool to weaken the opposition for the election which would come hot on heels of the referendum. So in the same breath that the Prime Minister is pleading for national consensus and for taking the referendum outside the political arena, he himself is planning to use the referendum as the last remaining tool to save his party’s skin at the next election.

Simple Matters… Complicated (maltastar.com- 13^th May 2002)

A referendum should only be held if the electorate’s decision can be expected to be the last word on the matter. It is normal for referenda to be held only where two basic conditions prevail:

1. It has to be about something which is of such importance and which is so irreversible that it binds and conditions not only the government that organises it but also future governments. Clearly the EU issue fits this condition. Labour’s Partnership proposal does not, as the decision could be eventually up-graded and is not irreversible.

2. The government that organises the referendum has to have sufficient time in office to execute the referendum decision.

On the second point the referendum being proposed for early next year fails to pass the test unless it is preceded by a general election giving the winning government good time to execute the electorate's decision.

To my simple mind if the PN goes for the referendum on this side of the election it would be a pure measure of convenience to enhance their chances of winning the subsequent electoral contest. This deprives the referendum from the national approach ingredient which is so essential.

Portfolio

Just because bond investments have performed better than equities these last three years it does not mean that this will remain so in perpetuity. It is probably time to switch investment strategies.

Let’s built four portfolios and follow them through the next six months to see which strategy performs best

Strategy 1 – zero risk

Let’s put Lm1000 in a straight Lm bank deposit earning 3.5%. No transaction cost and no risk of capital movements.

Strategy 2 – Medium risk/Balanced

Let’s invest Lm1000 in a balanced portfolio split into foreign currency reflecting the Lm basket to hedge against exchange fluctuations. We deduct straight away from the capital 4% being transaction costs and exchange costs leaving a net investment of Lm960 to be allocated as follows:

Lm 672 @ 2.3196 = EUR 1558.77 =1.081 units UBS (Lux) Strategy Balanced EUR B at EUR 1441.44

Lm 192 @ 1.6684 = GBP 320.33 = 2.234 units UBS (Lux) Medium Term Bond Fund at GBP 143.36

Lm 96 @ 2.7544 = USD 264.42 = 0.153 units UBS (Lux) Startegy Growth USD at USD 1728.06

Strategy 3 – Aggressive Lm

Let’s invest Lm1000 in Maltese equities deducting 2% transaction cost leaving Lm980 as a net investment. I feel Maltacom equity presently offers best value so we place an order for:

1089 shares of Maltacom at 90c0 each.

Strategy 4 – Aggressive Foreign Currency

As in strategy 2 we incur 4% transaction and exchange costs and place the investment as follows ( note this involves both capital fluctuation risks as well as exchange risks as the Malta Lira basket weightings have been substantially departed from even if the same currency components have been kept):

Lm240 @ 2.7544 = USD 661 = 5.835 units UBS (Lux) Equity Technology Fund at USD 113.29

Lm240 @ 2.7544 = USD 661 = 5.272 units UBS (Lux) Equity Biotech Fund at USD 125.39

Lm240 @ 1.6684 = GBP 400 = 5.975 units UBS (Lux) Equity Great Britain Fund at GBP 67.02

Lm240 @ 2.3196 = EUR557 = 5.705 units UBS (lux) Equity Eurostoxx50 Find at EUR 97.58

Each month for the next six months we will revalue our four strategies and see which one proves to be the winner. In case of strategies 2 to 4 I reserve the facility to make changes along the way to protect the portfolio or to cash in on profits. We will close it at end November to spend the money for Christmas.