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Owen Caterer

Prince had no will. Do you?

Posted on April 28, 2016

PrinceWhat was even more surprising than Prince dying, was him not leaving a will. With an estimated fortune of $300 million USD and a reputation for being a control freak including owning his own master copies, it seems out of character.  It is also going to be costly.  Prince didn’t organize his affairs thus costing his estate perhaps $120 million. But are you better organized?  Or will paperwork avoidance hurt the legacy you leave for your family?

Accidents happen.

Estate planning has an uncomfortable feel to it, but bad things happen.  Car accidents, heart attacks and strokes can strike out of the blue.  Every year tens of thousands of foreigners die away from home.  In 2015 alone there were 16 American deaths reported to US Department of State just in China.  Tip: highways are deadly here.  For long-term expatriates it gets more complicated because we often have assets in several different countries and thus legal systems.   Are you prepared for that?  Are you going to leave a plan, or a mess like Prince, which is currently estimated to take years and cost millions to untangle?

Where there’s a will there’s a way.

Firstly you need to get a will in each jurisdiction since legal systems differ.  It’s not that simple though, because your wills need to be coordinated in their creation.  A frequent inclusion or something to that effect is “…and this will replaces all others previously created…” and thus you may end up with competing wills from different countries that could be used to create a dispute down the track.  Obviously, that’s something you need to avoid.  A properly drafted will also help speed up probate and in China “properly drafted” also means certified by a lawyer, not just in a word document you created and signed at home.  Again it will need to happen in potentially a couple of different countries with differing rules.

An “alien spouse” is a blessing and a curse.

The good news is that China doesn’t have estate taxes (yet, but give them time), but sadly your home country probably does.  Some estate taxes such as in the United States or the United Kingdom can be up to 40-50% range.   In several cases, countries can also have arcane rules that can penalize “alien” spouses in some cases removing or drastically reducing the tax free threshold thus charging big taxes on very modest estates.   Still in other situations having your alien spouse hold assets can also have a lot of benefits, again depending on your country of origin.

Planning now can solve many problems.

Planning, and resolving these issues now, can thus provide a lot of benefits to a family with diversified assets and passports .  We have helped several clients coordinate these activities with lawyers and it is often surprising to the client the number of important issues the process raises such as taxes, children’s custody, control as well as crystallizing future plans and thus raises the idea of a trust.

Should you trust a trust?

Many people think of trusts when it comes to estate planning.  A trust is a vehicle that can help in many situations manage the passing of control and tax consequences, but it certainly isn’t everyone.  For starters it comes with a running cost and can lead to a relinquishing of control of assets.  Also for assets in some jurisdictions there will be limited benefits if any.  Beyond that it is difficult to give useful generic advice in this complicated area, so talk to an experienced lawyer about your situation to avoid the absence of any doubt.

Estate planning is like putting on underpants.

Let’s face it, getting a will and estate planning is like putting on clean underpants.  It important because it keeps the family jewels safe and as your mum says, is useful in the case of an accident.   However no-one goes around bragging about it at the bar like they do with successful investments or their latest ride. “Check out this awesome will I bought today!” is something no-one said ever.  Estate planning and sorting out wills are necessary to protect your wealth for future generations because getting it wrong could cost your family or spouse a lot more than that fancy watch ever did.

Don’t procrastinate, get it done.

We provide coordination services for our clients at cost because it’s important yet complicated to find the right specialists.  Some people also need the coordination to ensure it gets done in the midst of a busy life.  Still there is nothing stopping you tracking down a family lawyer familiar with the cross-border issues of a long term expatriate to get that paperwork sorted out on your own, but just don’t let it slide.

Hopefully it won’t be needed for a long time, but it will be worth it to ensure your children and loved ones receive the most benefit from your life’s hard work.  Prince can leave behind an amazing canon of work along with his mess, but that’s unlikely to apply to you.  Time to put on your big boy pants and do your paperwork to protect your family.


About the Author – 
Owen Caterer, B Int Bus, Grad Dip App Fin

Owen first lived in China in 1997 and has lived in Shanghai since 2005 working in various financial consulting and portfolio management roles before co-founding Caterer Goodman Partners in 2011.  Caterer Goodman Partners is a China based asset manager with a global view that manages funds for a simple percentage fee in accessible discount brokerage accounts.  

CG Family Wealth

CG Family Wealth is a division of Caterer Goodman Partners.  CG Family Wealth was founded to provide transparent professional financial advice to wealthy families throughout Asia. We align our interests with our clients through fee-based management approach to assets.   We provide discretionary accounts as well as wealth planning with a leading range of tax and accounting specialists from all the major countries to ensure the best quality advice for our clients and their families.


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Owen Caterer

How to be ‘Smart Money’, easily.

Posted on April 21, 2016

On February 15th of this year, we included the note further below in our client newsletter, on how to be ‘smart money’ during a market crash.  Let’s provide context by showing the opposite of smart money.

We wrote our note because a handful of clients who had taken fright at the falls of January and early February.  Two insisted, despite our advice, on completely cashing out of their holdings immediately including one who exited literally sold on the day the market bottom as it turned out.  This was despite our advice to go extremely bullish on February 7* because there were bargains everywhere and to stay the course.  It’s hard to make money selling at the bottom.

I wish I could say that these two clients were unusual but every year a small percentage of people in our firm and thousands of investors around the world do exactly the same thing.

Every. Single. Year.

So the simple answer to whether you are dumb money or smart, is how do you react to market falls?  Do you get excited to look for opportunities from the panicking masses.  Or are you one of the many that are panicking?

It’s that simple.

If you can stay logical during a market panic, then you are well on the way to being smart money.  Here is our quick note on how to stay calm and logical in a panicking market.


The natural human response to bad news is to ‘fight or flight’.  Bad share markets and blaring headlines can also prompt this adrenaline fueled response.  The consequence however of running and hiding until the coast is clear makes sense when faced with mountain lions but makes little sense when faced with a falling stock market.  The key, as Warren Buffett once pointed out when asked about his advantage (I’m rational, that’s it), is to remain unmoved by emotion as much as possible and make decisions based on the fundamentals.

So what can we do?

1. See market falls as opportunities.

Get greedy when others are fearful.  Market falls make people forget good sense and great companies can be bought cheaply.  Right now we are buying several strong companies that are the cheapest they have been in years.

2. Know what sectors/companies have good strong and stable earnings in all conditions.

You want something that will retain its value even if a crisis comes.  Remember you aren’t buying a stock but a company, so think about it in those terms.


3. Know what constitutes good value and stick to it.

You don’t need to know every ratio, but understanding that a single digit PE ratio with a book value of below 1 and a dividend yield of above 3% in a good sector, see above, is a very good start.  Many people want to know “the right time”, but that is unknowable.  What is possible is to know is what is a solid company at a great price.  Focus on that and the timing will take care of itself.

4. Be prepared to act in advance.

This is the part that many people, with their busy schedules will struggle with, but opportunities often don’t last too long.  Know in advance what you’ll buy.

5. Make sure you have some cash to invest (or bond funds to sell).

We like to have diversified portfolios for even the most aggressive clients.  When equity markets are high and we can’t find anything to buy at a good price, we return to at least 20% in cash/money market funds.  Sometimes it can take months or even years, but when we invest this money it will be for the right thing at the right price.  Or you can think of it as being fearful when others are greedy, just as Buffett always says.

The recent correction has panicked some people, but there are some quality companies selling at valuations not seen for several years, so if you do have some lazy money…


Since then, the S&P 500 is up about 12%.  The market isn’t panicking now, but the next fall will happen sooner or later and it will be much the same.  Time to plan your approach now.

Are you ready to be smart money next time?

About the Author – Owen Caterer, B Int Bus, Grad Dip App Fin

Owen first lived in China in 1997 and has lived in Shanghai since 2005 working in various financial consulting and portfolio management roles before co-founding Caterer Goodman Partners in 2011.  Caterer Goodman Partners is a China based asset manager with a global view that manages funds for a simple percentage fee in accessible discount brokerage accounts.  

CG Family Wealth

CG Family Wealth is a division of Caterer Goodman Partners.  CG Family Wealth was founded to provide transparent professional financial advice to wealthy families throughout Asia. We align our interests with our clients through fee-based management approach to assets.   We provide discretionary accounts as well as wealth planning with a leading range of tax and accounting specialists from all the major countries to ensure the best quality advice for our clients and their families.

* Yes, we have the trading record that confirms this.



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Owen Caterer

Will China’s RMB collapse in 2016?

Posted on January 8, 2016

How far will the RMB fall in 2016?

The trend for the RMB compared to the US dollar seems clearly down right now.  What does this mean though?  Is the government letting market forces find the value?  Is it a sign of coming collapse?  Is it government policy?  If so, where will it end up?  To predict where the RMB might go this year we must understand the major factors driving the currency.

It’s not me, it’s USD.

To those who think the RMB is slumping it is worth keeping in mind the US dollar has been on a rocket ship the last 12 months leaving many currencies cast off burning in their wake.  We aren’t just mentioning the Australian/Canadian Dollars or the Brazilian Real, it is also the Euro, the Pound and the Yen.  A small decline of 4.5% in 2015 against the US dollar for the RMB still puts it in uncomfortably strong territory.


If we assume that the US progressively raises rates, or even just stays pat this year (as seems likely to us), whilst the rest of the developed world, and even China is stimulating and lowering rates hoping for stronger growth, the mighty dollars days look set to continue.

The best thing in life is free stimulus.

It is no secret that the Chinese government has been gently trying to support the economy without reverting to old bad habits like force feeding loans onto state controlled banks in a desperate construction binge.  Letting the currency slide to support exporters and attract investment for the embattled manufacturing industry which has faced double digit wage growth for the last 10 years fits the bill.  Further with commodity and energy prices sliding like the 49ers/Chelsea football team there is very little inflation pressure that would normally prevent a currency devaluation.  Given current conditions, this also looks set to continue in 2016.

Sticky fingers; sticky currency.

Despite all the downward momentum, we think the defining factor for the Renminbi in 2016 will continue to be the government.  It is clear the Chinese government is happy for the currency to slide, but how far and fast?  Given the current leadership’s close personal experience with extreme instability during the cultural revolution, instability and chaos is to be avoided at all cost.   How will the government keep control? In most countries you would have seen the currency react in a far bigger way given the current fundamentals, but then, China isn’t most countries.

You are with us or against us.

There are a plethora of rules that restrict currency movement in China but given the number of holes in the capital walls the “other” ways of getting companies both public and private to support government policy are even more important.  Witness the investigation of short selling a few months ago and the recent suspension of 3 banks foreign exchange licenses due to “unnecessary arbitrage”.  I’m no lawyer, but my understanding is these activities were clearly legal, but the message is loud and clear that when doing business in China actions that work contrary to government goals won’t be tolerated.

The $3.4 trillion dollar wall.

Still, there are many legal ways to get money out and the flow from millions of average investors and private companies has meant that the government was forced to support the currency in 2015 to the tune of $600 billion USD.  For most governments that would be impossible or at best presage a crisis.  China however started the year with $4 trillion US dollars in foreign currency reserves and now has around $3.4 trillion USD.  This is quite the rapid decline but the amount is the world’s largest and remains plenty.  It is sufficient for the government to achieve its goals for the next couple of years even assuming continued currency support.

Sun Tzu: Let your plans be dark and impenetrable as night, and when you move, fall like a thunderbolt.

In financial markets, a steady trend, like currency decline, can build expectations and makes the possible, probable and then certain.  A continued slip can lead to an unseemly collapse.  The government mandarins know this and a panicked collapse is the thing they want to avoid most of all.  So even though a decline is their goal, panic is not, so they will push back from time to time to make the trend reverse and keep the market unbalanced.  Sometimes this push back might be for a day or two and might be severe.  Sometimes it might be a for week or possibly even a month or more, so be careful with short term trades no matter the strength of the overall trend.  This recent push back is case in point.

So, where are we going this year?

Some of this depends on the strength of the US dollar but we believe the recent history of the rise of the Renminbi is instructive in understanding government operations, which is the primary factor.  The rise was constrained to 6-10% per year in a pretty orderly fashion, with the occasional little dip to keep people unsure.

 We can see since the beginning of 2014 however that volatility has risen and the decline of the Yuan in the brief start of 2016 has been far faster, moving 1.5% in 7 days.  We don’t however expect a 78% annualized rate to be continued, far from it.  Still, it is likely to be faster than 6-10% given the increase in volatility the last 2 years and the fact it matches government goals.  Still it won’t be much more since progressive steady-as-she-goes movements remain the government’s modus operandi.  This thus gives us a range of 10-15% decline in 2016, or an exchange rate with US dollar of 7.12 to 7.45 by year end.  Still it’s a forecast so it is unlikely we will be as accurate as our last Renminbi forecast.


About the Author – Owen Caterer, B Int Bus, Grad Dip App Fin

Owen first lived in China in 1997 and has lived in Shanghai since 2005 working in various financial consulting and portfolio management roles before co-founding Caterer Goodman Partners in 2011.  Caterer Goodman Partners is a China based asset manager with a global view that manages funds for a simple percentage fee in accessible discount brokerage accounts.  


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Owen Caterer

How to avoid Alternative Investment frauds, always

Posted on November 5, 2015

Working in investment management in Asia we get asked all the time about investment strategies by our friends.   Often the question is these days is about alternative investments since many people are looking for something else besides and in some cases instead of, their stock portfolio.   Our advice is in the anti-Nike, “just don’t do it”.  Just don’t.

We realize, this simple announcement might need some explaining since the case for an investment that doesn’t follow the stock market can seem like a good idea.   We consider alternative investments to be a category of real assets outside the world of funds and direct stocks that was popularized by storied investors such as of the Yale Endowment.  Things such as wine, stamps, precious metals, diamonds, forestry plantations, art and collectibles are all alternative in our view.

Our negative advice puts us at odds with quite a few of our friends but we aren’t writing this advice to make friends (or commissions).  It also seems to fly in the face of the convincing stories and beautiful pictures and those wonderful graphs that go up towards the horizon, with barely a pause for breathe.

Practically all alternative investments sold by a broker ends in a loss.alternative_investment

Not every investment ends in complete loss of capital its true,   But the failure of programs and strategies that we have been
pitched, and avoided, is so regular from what we can see, that your hit rate might be as low as 2 in 10.  Yup, that’s an 80% chance of losing money and sometimes the loss is 100% of your money.  This makes the stock market look positively low risk.  Not that you’ll ever see this risk reflected in the sales material of alternative investment salesmen.  Even worse we think that perhaps as many as one third of investment programs are borderline fraudulent if not a complete scam.  Sometimes it is difficult to tell the difference between the frauds and merely incompetent, but is that truly a useful distinction?

The only time to buy an alternative investment.

If you know more about something than anyone else you know and could be considered an expert in your area because you have been working or studying your area for years, or even better, a decade, then, maybe, just maybe you are qualified.  We don’t mean that you have been drinking a glass or two of wine per night since you were 21 and going to the odd wine dinner.  That you once visited Bordeaux on holiday and visited a few wineries.  We mean work in the industry selling, growing and producing wine.   It is similar to the old poker story.  If you can’t tell after the first 5-6 rounds who the dupe is in a game of poker; then the dupe is you. The same goes for alternative investments.

Why are alternative investments so risky?

Once you move outside market traded assets like the stock and bond market, a lot of the protections in place vanish.

  1. There are no cu56307091-C77D-267E-D892-8DF979A62815stodian accounts built into the system to protect theft from your asset manager. Think about that for a second – there is nothing stopping your wine broker, loading up a case your valuable wine in the back of his van and selling it and later telling you that it had been “lost or broken”.  Of course, that can give him a bad reputation, but by that time, the fraud has happened, and, if done in a small way on enough people, the perpetrator has disappeared somewhere with his illicit gains.
  2. The valuation methodologies on alternative investments can become divorced from reality, thus meaning you are paying overinflated prices for assets. These methodologies often must be devised because trading happens so rarely (unlike stocks), but they can be abused to pretend you are making gains in your fund when you are not.  Often this starts innocently to smooth a bad month, but sooner or later the manager will be relying on this most months to show strong growth and attract assets that the difference might be 20-40%.  Independent valuation experts are paid by the manager, so how independent are they truly?  We have seen this happen to property funds like student accommodation funds for example, that whilst otherwise solid, ended up with problems unloading their assets that had overinflated prices and thus locked up their client’s assets for years whilst they waited for reality to catch the model.
  3. There are no protections in place against self-dealing. This is where your helpful broker buys at the market at a lower price and then sells to you for a higher price.  For example your wine broker might pick up a case of Chateau Lafite for $10,000 and then sell it to you for $14,000 USD. Would you ever know that your wine broker quietly pocketed $4,000 completely risk free?  Later the broker can just say that “demand isn’t that strong right now, so we suggest you hold for another 2 years while we charge you a management fee for crossing our fingers and hoping that the market bails out our poor deal”.  Sounds like an awesome deal, right?  Protections against this were put in place in securities markets more than 100 years ago, but they don’t exist in these unregulated markets.
  4. Understand you are betting on future fashions which are unpredictable. We aren’t talking about buying vintage clothes here, but the simple fact that some things go in and out of fashion.  Witness the collapse in Bordeaux prices as Chinese investors moved on from buying bottles of wine to buying Burgundy wineries.  Who knows what the hot trend in art will be in 10 years?  Investing is about buying an asset that can deliver a future income stream, like a company that pays dividends or a property that pays rent.   Picking a future hot fashion you need a lot of luck.
  5. Fear the word ‘guarantee’ and you’ll avoid the worst of the worst. Whenever my partners and I hear the word ‘guarantee’ from an investment provider, we go running immediately.  There is no better predictor of investment failure in my opinion, than investment providers who use that word.  Look for a good risk on a company that is growing to the  future and making money now (think Facebook and not Tesla) and you are likely to do far better than looking for a safe haven that is anything but.

Don’t be the patsyimages (2)

So, our simple rule of thumb is, if you don’t know how to engage in your preferred market without a broker and you don’t know all the right people, the tricks, the history, the strategy and the market players BEFORE the broker turns up.  Then you should turn the broker away.  If you need entry to the market via a broker (who might also call himself an IFA or financial adviser) because you don’t know enough, then you shouldn’t be playing the game; because the patsy at the poker table is you.




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