Friday 11 March 2016

Investment March 2016: ETF Portugal

Commerzbank, the holder of my ETF Portugal

A long, long time ago I wrote a reflection concerning how much of the overall population is actually working. This measurement I find to be much more important than any manipulated values regarding unemployed people etc. The beauty of it is the simplicity of it. Everyone not working in a country must be supported by the workers. It does not matter if you are old, young, unemployed or on social welfare. Either you contribute right now, today, or you do not.

When I wrote that reflection (working population in various countries) there were a couple of countries that stood out from the rest. Amazingly, to me back then, Portugal ended up very high on the scale of %-age non government workforce of total population. Looking back at the financial crises then Portugal were always included in the PIGS which later became PIIGS (Portugal, Ireland, Italy, Greece and Spain). Besides from being included in the PIIGS I must admit that I have heard very little crying from Portugal concerning the situation. The Portuguese are a population that loves Fado which is... well... not very happy music and singing. The Portuguese knows in the very heart and soul - suffering. I would almost bet that due to this reason we have heard nothing about protests regarding the political reforms that were brought in etc. etc.

During the peak of the financial crises the unemployment rate in Portugal never went ballistic like in Greece, Spain and Italy. It remained pretty ok and are today at around 12% which of course is high but one tends to forget that southern European countries do not have the social security system of the north. If things goes bad then your family is, in Portugal, Spain, Italy and Greece, forced to care for you which means that the figure for unemployed in the south is the same as unemployed + social welfare in the north. Portugal have 12% unemployed and Germany have 4 % unemployed + 8% social welfare giving also 12% but sure... in the official statistics Germany only publish the unemployment rate and get to beat themselves on the chest and pad their own shoulders. Reality? Well... not really... at least not in my eyes. But the entire financial system today is build up by belief. Take it away and the collapse is a guarantee so everyone leaves it be.

Back in the days I lived for one month in Lisbon and even though I was not very impressed by their food the population was hard working. I respect the Portuguese population very much. Oh, and their port wines are wonderful! They are very strongly tied to Brazil and the better it will go for Brazil the better Portugal will also do.

Going back in time then the Portuguese Index PSI20 was to a very large %-age finance. Today this is no longer the case. Today around 30% is consumer companies, 25% is utility, 16% oil, 11% industry & transport and banks end up at around 9%. I am sure that there will be a bank or two that goes belly up but what do I care? It is only 9% of the index that I bought and hopefully one of the other banks will take over the customers but not the debts.

I believe in the hard working population of Portugal and therefore I decided to be part of your future success by buying an index fund concerning your 20 largest, publicly traded, companies. In the latest reports the GDP per capita is slowly but surely growing in Portugal. This is good news for Europe!

The investment during March therefore became ETF Portugal and I bought 370 parts at a total investment of 2,053.63 € including fees which means that I paid 5.55 € per part.

It should also be mentioned the the taxes for retired people are very beneficial in Portugal. This means that a lot of retired Swedish people are buying houses and apartments in Portugal and are living there a large part of the year. The retirement money that were paid in in Sweden gets transferred to Portugal. Portugal might not get so much taxes on it but at least these retired people are pushing up the consumption in the country. I could also make a very large bet on that when there will be some more serious health issues then these retired people will directly go back to Sweden to be close to their families which means that the healthcare bills will to a large extent not be carried by the Portuguese but by the Swedish population. So in the end to bring it into the context of the Portuguese national sport then we have Portugal 1 : 0 Sweden.

To take a look at my current Stock Portfolio then please click on that link. The portfolio will however not be fully updated until the end of the month.


TomB said...

Interesting view on both, unemployment and Portugal.


Fredrik von Oberhausen said...

Hi TomB,

PSI20 was started back in 1992 at 3000 points. Today 24 years later it is at around 5000 points. That is an around 66% increase in 24 years or around 2% per year. In the same period the GDP of Portugal have gone from 100 billion $ to 230 billion $, an increase of 130% or 3.5% per year.

Today, in my opinion, there is a very large discrepancy between the development of the stock market and the development of the country.

Happily this discrepancy have not always remained as such. Periodically the stock market have gone well beyond the development of the country (such as in year 2000 when PSI20 was up at 14400 points and almost the same happened in 2008 when it was up at 13500 point) and yes, I hope that will happen again in the future.

I guess we should call these ETF Investments (Russia, Austria & Portugal) for my contrarian Sir Templeton investment strategy. He used to buy almost every company in international stock markets and countries that had crashed. Happily for me it is possible to buy index funds today otherwise my trading fees would have gone ballistic.