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Posts Tagged ‘Felix Zulauf’

Tänkvärt från Felix Zulauf

Som ni säkert märkt har jag trappat ned lite på inläggen. Det finns flera anledningar till detta. Inte minst att det vi nu bevittnar och som många dras med i enligt min ening bara är ett stort brus, ett slags skådespel på vägen mot den slutliga och oundvikliga nollställningen. Det finns faktiskt inte så mycket att tillägga som inte redan är sagt, både här och andra kloka bloggare. Om det är Spanien som faller innan Italien är t ex sett ur detta perspektiv tämligen ointressant.

En person som jag har stor respekt för är Felix Zulauf. Det här är vad han har att säga:

There is too much debt in the industrialized world and the financial system is virtually bust. Rea/ disposable personal income is stagnating or declining. Employment participation keeps heading south. This produces a chain reaction: Weaker consumer demand in the West weakens manufacturing in places like Asia, which weakens natural-resource producers such as Australia or Brazil.
 
As for the euro, it is a misconstruction. As I said in January, I expect the disintegration to begin in the second half of this year. That should lead the world into financial and economic chaos. My two major themes into 2013 are euro disintegration and China weakness, due to the bursting of a real- estate boom.
 
The global economy is weakening cyclically on top of a highly fragile credit system. It is an explosive cocktail. The tower of debt is compounded by the gigantic over-the-counter derivatives market. In the past 10 years the notional value of derivatives worldwide has grown from $100 trillion to almost $800 trillion. The numbers are mind-boggling. if something goes wrong in the real economy, it could shake the whole credit system dramatically. It is a dangerous situation.
 
The euro is not the real problem but a trigger and compounder of the structural problems. It could only work if the euro zone entered a fiscal and political union, which won’t happen, as Europeans aren’t prepared to give up national sovereignty. Politicians therefore will go from one compromise and quick fix to the next, with the crisis deepening until some nations at the periphery won’t be able to stand the economic pain anymore. They will want their old national currency back, and devalue to adjust the external accounts.
 
China won’t be able to save us, as it did in 2009. The Chinese will lower interest rates but their actions will be reactive and lag. If my thesis is right, we must assume things will go awfully wrong in the next 12 months and the system will be at risk of collapsing. Most U.S.-focused investors might not understand it as they see corporations doing well.
 
The potential exists for a broad-based nationalization of the credit system, capital controls and dramatic restrictions on financial markets. Some might even be closed for some time.
 
We are witnessing the biggest financial-market manipulation of all time. The authorities have intervened more and more, and thereby created this monster. They might change the rules when the game goes against their own interests.
 
We are in a severe credit crunch. It starts when the weakest links in the system can’t finance their activities. Then you have a flight to safety into Treasuries and German bunds, compounded by a quasi-shortage of good collateral. That’s why bond yields have fallen so low. This isn’t an inflationary environment but a deflationary one.

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Kategorier:Uncategorized Taggar:

Felix Zulauf: Vi kommer få se en ny kris större än 2008 och flera länder kommer gå omkull

Rekommenderar att ta del av vad den kompetente och insiktsfulle Felix Zulauf har att säga i det senaste numret av Barron’s.

Här är ett par citat som jag fann extra intressant:

By the middle of the decade at the latest, we will have a major crisis, bigger than 2008. Several countries will default, particularly in Europe. Quasi-fixed exchange rates between the U.S. and China will start to unravel, which will force the U.S. dollar down tremendously.

Greece is bust but it isn’t allowed to default. If it does so you could see a bank run throughout the European and the global banking system.

If Greece defaults, the ECB probably will lose 30 billion to 50 billion euros. The bank’s equity capital is €10 billion. The Irish and probably Portugal and Spain would default. A default would be worse than the collapse of Lehman Brothers.

Felix hör till de som inte bara vet vad som väntar men som också vågar säga det rätt ut.

Nedan är hela intervjun med Felix Zulauf:

Barron’s: How’s the view from Europe, Felix?

Zulauf: I am in a good mood but I feel sorry for the world. The global economy’s structural problems haven’t gone away, and the authorities continue to kick the can down the road. They go from one quick fix to the next. Quick fixes have worked well in the past two years, and might work a bit longer. But at some point we will have to face reality, and that will be a very sour moment.

In the medium term, it is much more a trading market than an investment market. Expectations for earnings growth are too optimistic. Professional investors are fully invested because they have no choice. Individuals have come back to the market, but not like in previous cycles. There just isn’t much firepower left to push stocks higher, and there have been some important changes in fundamentals.

Such as?

The biggest challenge has been greater inflation, particularly in emerging economies. These economies are operating at full capacity. With inflation rates rising, the authorities moved away from ultra-expansive policies, and in China they started to tighten credit. That will slow these economies over time, although they are structurally sound.

The problem is in the developed world. In the U.S., quantitative easing is ending due to tremendous criticism. The hurdle for launching QE3 will be very high. Europe is a special situation. The ECB [European Central Bank] is trying to reduce its balance sheet for the third time since the financial crisis of 2009. The first time they tried it triggered the Greek crisis. The second time it triggered the Irish crisis. The third time there could be problems in Italy.

What will happen if Greece defaults on its debt?

Greece is bust but it isn’t allowed to default. If it does so you could see a bank run throughout the European and the global banking system. The ECB and Germany are trying to force a Teutonic fiscal program on Europe. They are on a collision course with economic reality. If Greece defaults, the ECB probably will lose 30 billion to 50 billion euros. The bank’s equity capital is €10 billion. The Irish and probably Portugal and Spain would default. Germany’s Bundesbank owns more than €300 billion of European debt. A default would be worse than the collapse of Lehman Brothers.

If you ran the ECB, how would you deal with Greece?

There is no painless solution. We have to let entities, even governments, default. But we have to make sure first that the banking system can handle its clients’ defaults. That is the problem. In the European banking system, equity capital is only 3% of assets. In the U.S. it is 4.5%. Raising banks’ equity-capital ratios is the only way to solve the problem in the long run. We missed the chance during the financial crisis. I would have handled the whole crisis differently. I would have nationalized the banks and not allowed them to pay any dividends or big bonuses. First they would have to improve their equity-capital positions. This would go hand in hand with extremely low growth.

You would have been very unpopular.

The fiscal authorities have to support the system. But instead of wasting money to boost consumption, they should be spending on investments that will bear fruit long term. By the middle of the decade at the latest, we will have a major crisis, bigger than 2008. Several countries will default, particularly in Europe. Quasi-fixed exchange rates between the U.S. and China will start to unravel, which will force the U.S. dollar down tremendously. It will push bond yields up and stocks down.

What do you see in the near term?

From Asia to Europe to the U.S., all the important economic indicators are rolling over. Some blame the Japanese tragedy; others, the weather. It is more than that. It is the result of policy decisions. Economic growth could slow to a crawl well into early next year. The stock market isn’t priced for that. Analysts will cut their earnings estimates. There is 20% downside risk from the market’s intraday May high. Once the economic news turns decisively disappointing, the authorities will come to the rescue and try to stimulate again. That is when a trader can move in on the long side for a rally at year end.

Those who have to own stocks should buy pharmaceuticals, health care and consumer staples rather than cyclicals. In the near term, through the summer and fall, I would short the XME [ SPDR S&P Metals and Mining exchange-traded fund], the XLI [Industrial Select Sector SPDR], the XLK [ Technology Select Sector SPDR] and the XLF [ Financial Select Sector SPDR]. If you have to own something, go with theConsumer Staples Select Sector SPDR [XLP] and the Utilities Select Sector SPDR [XLU].

What form will stimulation take this time?

The U.S. central bank is doing the opposite of what Paul Volcker did from the late 1970s until the mid-’80s. He tried to break inflation by limiting the money supply. In so doing, he created extremely high real interest rates. It took the bond market about five years to understand it. [Federal Reserve Chairman Ben] Bernanke’s monetary policy creates deeply negative real interest rates. It will take the bond market several more years to realize this will lead to inflation. Bonds can’t be recommended to long-term investors for the next 10 years. Gold will beat stocks in the next few years, even if gold corrects by more than 10%.

Thanks, Felix.

Kategorier:Statsfinanser Taggar:,

Felix Zulauf: Guld är bästa skyddet från det kommande sönderfallet av vårt monetära system

Finanslegenden Felix Zulauf, som sitter med i ‘Barrons roundtable’, deltog nyligen i en intervju som är mycket läsvärd.

Här är ett litet utdrag:

”I don’t think we can go to a gold standard again, because if we go to a gold standard, there is not enough gold around to cover all the needs of all the companies to cover their currency. But gold, in one form or another, will play an important role in the next currency system once it is born out of the ashes of the current currency system. Therefore, I do believe that gold will be the best way to move your savings from the old world, that is in short of a final game until it breaks down completely and we have a new system.

Kategorier:Guld Taggar:,