Superior investment results require that you deviate from the norm. In our monthly Absolute Return Letter (ARL) we share our out-of-the-box macro view of the world and corresponding megatrends. Subscribers get the letter straight to their inbox about 1o times a year.
The Rise of Wealth-to-GDP
… And the Long Road to Normalisation
US wealth has grown dramatically since the mid-1990s, resulting in a rise in US wealth-to-GDP which, as of the latest count, is 578%. This is still much higher than the long-term mean value, which is only 380%. The theory suggests that, sooner or later, we will come back to that mean value again. What does that mean?
The House of Cards
Another general election in Italy is coming up, and the Italian house of cards is at risk of collapsing again. Will the new Prime Minister exit the EU as she has threatened to do? What would be the consequences if Italexit is suddenly a fact? The Italians, who are not exactly novices in political drama, could be in for a few rather tense months.
The End of Indexing
Have we finally arrived at the point where passive investing no longer makes sense – a regime change so to speak? From a fundamental point of view, yes, but investor psychology can play games with logic for much longer than most investors realise, as the Japanese found out in the late 1980s. Is the day of reckoning for most risk assets on its way?
Is Gold the Answer?
Could gold provide the answer if you wish to protect your portfolio against out-of-control inflation? The short answer is yes but probably for a different reason than you may think. And then there is silver. It may not offer the same protection against inflation as gold does, but we could still be entering a very benign period for silver prices.
Are Public Deficits Out of Control?
Is Gold the Answer?
The combination of rising interest rates and incessantly growing government debt is a bad cocktail, and you wonder for how much longer it can continue, before we have a sovereign default or two on our hands. Nobody knows the answer to this question but, if interest rates continue to rise, it is only a question of time.
10% Inflation to Come?
Inflation fears were already rampant, but the war in Ukraine has elevated them to levels we haven’t seen since the 1970s. However, there is a significant difference between inflation in Europe and that of the US. In fact, we think European central banks only face a limited challenge, whereas the Fed is facing a task that could turn quite ugly.
The Commodities Quandary
In the past, you never wanted to be long commodities once central banks go to war against inflation, and that is what they are now doing. It would therefore be tempting to sell all your commodities at the earliest opportunity, but the green transition could drive certain commodity prices even higher, thus we have a bit of a quandary on our hands.
A Democracy on Crutches
Dark forces in the Republican party have a revolting plan. The plan is to make it virtually impossible for the Democratic party to win the swing states, which almost always determine the next tenant of the White House. Consequently, Americans could be facing civil unrest, possibly even civil war. The thought is not as ludicrous as you may think.