As stock market volatility looks set to continue for some time, investors can be forgiven for wanting to flee the carnage and hide their money in the safest possible haven.
In chaotic times like these, traditional stores of value such as bonds, gold and cash often come into their own, by shielding investors from the worst of the meltdown.
However, both gold and bonds have performed erratically in recent weeks, while returns on cash are plunging even lower, amid a flurry of global interest rate cuts.
Before the coronavirus crisis struck, some cryptocurrency fans argued that Bitcoin also offers protection, but it has subsequently fallen even faster than shares.
So which of these safe havens, if any, should you be racing to right now?
Government bonds
US government bonds, or Treasuries, are one of the lowest-risk investments in the world.
They are issued by the US Department of the Treasury to finance government spending, and it pledges to raise money by any means legally available to repay them. No wonder investors rush to buy them in a crisis.
After wild swings in March, US Treasuries have now justified their safe haven status again.
Michael Bolliger, analyst at UBS Global Wealth Management, says US Treasuries also benefit from being issued in the world's reserve currency.
Despite these advantages, bonds were incredibly volatile in March. While prices initially went up as stock markets fell, they then fell as panicky traders dumped long-term bonds because they anticipated a surge in the supply of newly issued debt, which would drive down prices.
Bond traders later calmed down after the Senate approved a massive $2 trillion (Dh7.34tn) economic relief package. “After wild swings in March, US Treasuries have now justified their safe haven status again,” Mr Bolliger says.
When bonds are in demand, prices rise, but yields fall. On Friday, the yield on a 10-year US Treasury fell to just 0.59 per cent. If you invest in a 30-year Treasury, you get only slightly more at 1.23 per cent.
US Treasuries are safe, but you pay a high price for that kind of security these days.
To get exposure, USD Treasury Bond UCITS ETF (VDTY), which invests 100 per cent in US Treasuries, currently yields 2.06 per cent. It boasts an impressive year-to-date return of 8.91 per cent, or 14.69 per cent over 12 months, according to Bloomberg.
Gold
Gold is the oldest store of value but its price also fell in March, as fund managers took profits and used the money to cover losses elsewhere, meet customer redemptions or buy shares at reduced prices.
The gold price is nonetheless up a punchy 26.74 per cent over the last year, according to Goldprice.org. Carsten Menke, head of next generation research at Julius Baer, says its safe haven status holds good. “As the global recession unfolds, we still see more upside for gold,” he adds.
Gold is still some way off its all-time high price of $1,895 per ounce, which it hit during the eurozone crisis in September 2011.
At the time of writing, it trades at $1,618, and Mr Menke says it will only top its previous record if the crisis “moves out of hand and the expected short and sharp recession turns into a longer-lasting depression”.
Professor Stephen Thomas, associate dean, MBA Programmes at Cass Business School in Dubai and London, says gold has enjoyed a fantastic 12 months, along with US bonds, proving the importance of having a diversified portfolio. “The gold price certainly isn't going to collapse in the current environment, when shares are impossible to value.”
The danger comes when markets recover, as the gold price could slip back, but there seems little danger of that right now.
Perhaps the easiest way to invest in gold is through an exchange traded fund. WisdomTree Physical Gold (PHAU) is up 6.07 per cent so far in 2020 and 24.74 per cent over 12 months, according to Bloomberg, while iShares Physical Gold (SGLN) is up 14.35 per cent and 34.20 per cent over the same period.
Cash
Cash has been out of favour since interest rates were slashed to near zero during the global financial crisis of 2008.
Last month, the US Federal Reserve cut its already-low benchmark interest rate to zero in repsonse to the current crisis, but Mr Thomas says that is the least of people's worries right now. “Cash has been underappreciated for too long. In today's low inflation world, it might be a hidden gem in your portfolio,” he adds.
Cash is safe but just remember that it will not completely protect your capital, as inflation may erode its value in real terms.
Mr Bolliger at UBS says in the longer run, you need your money to work harder than it will sitting in cash. “Money markets yield little to nothing, and even with inflation rates rather low, cash holdings offer negative real expected returns.”
However, amid today’s extreme volatility, many investors will still appreciate the comfort that cash offers.
To get exposure, a search on comparison site Souqalmal.com shows HSBC eSaver pays up to 1.5 per cent in interest, Emirates Smart Saver Account pays 1.5 per cent, RAKBank Fast Saver pays 1.75 per cent and ADCB Active Saver Account up to 2 per cent. The interest rate you receive depends on factors such as how much you save and in which currency.
Bitcoin
Before Covid-19, fans of cryptocurrencies started to circulate the theory that Bitcoin was now a safe bolthole in a crisis. The last month has proved them wrong.
On February 12, Bitcoin traded at $10,350. Exactly one month later, as coronavirus swept the West, its price had slumped to $4,857 as panicky investors fled risky assets in a rush to raise cash ahead of an expected liquidity crunch. It has recovered slightly to $6,720, but as Vijay Valecha, chief investment officer at Century Financial, notes: “Bitcoin has actually been the biggest loser in this crash, falling 70 per cent as traders and investors shifted into cash.”
The cryptocurrency is a speculative and highly volatile investment, making it a poor safe haven, Mr Valecha says. “Bitcoin may be more erratic than ever amid the current volatility.”
Mr Bolliger says: “We do not consider Bitcoin as an investment vehicle, and would recommend investors not to see cryptocurrencies as a safe haven asset.”
Stay diversified
As bonds and gold have both demonstrated, even safer asset classes can fall, but Mr Valecha says their recent minor correction may be healthy because both were in danger of becoming too expensive. They now look more attractive at today's slightly lower price.
Maurice Gravier, chief investment officer at Emirates NBD, says whatever happens in the stock market, one thing never changes: “The absolute golden rule in investment is diversification.”
Every investor should build a balanced portfolio that includes shares, bonds, gold, property and cash. So if one asset plunges, the others may compensate by holding firm or rising.
The balance you hold will reflect personal factors such as your age, and attitude to risk.
Mr Gravier says even safe havens can crumble if investors rush into cash to reduce or cover their losses. “This extreme correlation is generally temporary, so if anything it can be an opportunity,” he says.
Along with diversification, time is your best defence. Whether buying risky assets like shares, or safer options such as bonds and gold, you should aim to hold for the long term. "Avoid being a forced seller at the worst possible time, and having to take your losses," says Mr Gravier.
Panic episodes like this one are a good opportunity to buy assets you are underexposed to, he says.
Currently, he is neutral on gold, relatively overweight in cash and underweight in bonds. “We are always ready to adjust,” Mr Gravier adds.
Dubai Rugby Sevens, December 5 -7
World Sevens Series Pools
A – Fiji, France, Argentina, Japan
B – United States, Australia, Scotland, Ireland
C – New Zealand, Samoa, Canada, Wales
D – South Africa, England, Spain, Kenya
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Have you been targeted?
Tuan Phan of SimplyFI.org lists five signs you have been mis-sold to:
1. Your pension fund has been placed inside an offshore insurance wrapper with a hefty upfront commission.
2. The money has been transferred into a structured note. These products have high upfront, recurring commission and should never be in a pension account.
3. You have also been sold investment funds with an upfront initial charge of around 5 per cent. ETFs, for example, have no upfront charges.
4. The adviser charges a 1 per cent charge for managing your assets. They are being paid for doing nothing. They have already claimed massive amounts in hidden upfront commission.
5. Total annual management cost for your pension account is 2 per cent or more, including platform, underlying fund and advice charges.
If you go
The flights
Emirates and Etihad fly direct to Nairobi, with fares starting from Dh1,695. The resort can be reached from Nairobi via a 35-minute flight from Wilson Airport or Jomo Kenyatta International Airport, or by road, which takes at least three hours.
The rooms
Rooms at Fairmont Mount Kenya range from Dh1,870 per night for a deluxe room to Dh11,000 per night for the William Holden Cottage.
About Takalam
Date started: early 2020
Founders: Khawla Hammad and Inas Abu Shashieh
Based: Abu Dhabi
Sector: HealthTech and wellness
Number of staff: 4
Funding to date: Bootstrapped
Honeymoonish
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Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
THE SPECS
Engine: 1.5-litre
Transmission: 6-speed automatic
Power: 110 horsepower
Torque: 147Nm
Price: From Dh59,700
On sale: now
The view from The National
Plan to boost public schools
A major shake-up of government-run schools was rolled out across the country in 2017. Known as the Emirati School Model, it placed more emphasis on maths and science while also adding practical skills to the curriculum.
It was accompanied by the promise of a Dh5 billion investment, over six years, to pay for state-of-the-art infrastructure improvements.
Aspects of the school model will be extended to international private schools, the education minister has previously suggested.
Recent developments have also included the introduction of moral education - which public and private schools both must teach - along with reform of the exams system and tougher teacher licensing requirements.
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THE BIO
Age: 30
Favourite book: The Power of Habit
Favourite quote: "The world is full of good people, if you cannot find one, be one"
Favourite exercise: The snatch
Favourite colour: Blue
THE 12 BREAKAWAY CLUBS
England
Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, Tottenham Hotspur
Italy
AC Milan, Inter Milan, Juventus
Spain
Atletico Madrid, Barcelona, Real Madrid
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Countries recognising Palestine
France, UK, Canada, Australia, Portugal, Belgium, Malta, Luxembourg, San Marino and Andorra
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
How to help
Send “thenational” to the following numbers or call the hotline on: 0502955999
2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200
Financial considerations before buying a property
Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.
“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says.
Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.
Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier.
Crazy Rich Asians
Director: Jon M Chu
Starring: Constance Wu, Henry Golding, Michelle Yeon, Gemma Chan
Four stars
Sinopharm vaccine explained
The Sinopharm vaccine was created using techniques that have been around for decades.
“This is an inactivated vaccine. Simply what it means is that the virus is taken, cultured and inactivated," said Dr Nawal Al Kaabi, chair of the UAE's National Covid-19 Clinical Management Committee.
"What is left is a skeleton of the virus so it looks like a virus, but it is not live."
This is then injected into the body.
"The body will recognise it and form antibodies but because it is inactive, we will need more than one dose. The body will not develop immunity with one dose," she said.
"You have to be exposed more than one time to what we call the antigen."
The vaccine should offer protection for at least months, but no one knows how long beyond that.
Dr Al Kaabi said early vaccine volunteers in China were given shots last spring and still have antibodies today.
“Since it is inactivated, it will not last forever," she said.
LIVING IN...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Generational responses to the pandemic
Devesh Mamtani from Century Financial believes the cash-hoarding tendency of each generation is influenced by what stage of the employment cycle they are in. He offers the following insights:
Baby boomers (those born before 1964): Owing to market uncertainty and the need to survive amid competition, many in this generation are looking for options to hoard more cash and increase their overall savings/investments towards risk-free assets.
Generation X (born between 1965 and 1980): Gen X is currently in its prime working years. With their personal and family finances taking a hit, Generation X is looking at multiple options, including taking out short-term loan facilities with competitive interest rates instead of dipping into their savings account.
Millennials (born between 1981 and 1996): This market situation is giving them a valuable lesson about investing early. Many millennials who had previously not saved or invested are looking to start doing so now.
if you go
The flights Fly Dubai, Air Arabia, Emirates, Etihad, and Royal Jordanian all offer direct, three-and-a-half-hour flights from the UAE to the Jordanian capital Amman. Alternatively, from June Fly Dubai will offer a new direct service from Dubai to Aqaba in the south of the country. See the airlines’ respective sites for varying prices or search on reliable price-comparison site Skyscanner.
The trip
Jamie Lafferty was a guest of the Jordan Tourist Board. For more information on adventure tourism in Jordan see Visit Jordan. A number of new and established tour companies offer the chance to go caving, rock-climbing, canyoning, and mountaineering in Jordan. Prices vary depending on how many activities you want to do and how many days you plan to stay in the country. Among the leaders are Terhaal, who offer a two-day canyoning trip from Dh845 per person. If you really want to push your limits, contact the Stronger Team. For a more trek-focused trip, KE Adventure offers an eight-day trip from Dh5,300 per person.
Meydan racecard:
6.30pm: Handicap | US$135,000 (Dirt) | 1,400 metres
7.05pm: Handicap | $135,000 (Turf) | 1,200m
7.40pm: Dubai Millennium Stakes | Group 3 | $200,000 (T) | 2,000m
8.15pm: UAE Oaks | Group 3 | $250,000 (D) | 1,900m
8.50pm: Zabeel Mile | Group 2 | $250,000 (T) | 1,600m
9.20pm: Handicap | $135,000 (T) | 1,600m
