Sunday, August 21, 2016

Are We In 1912 Again? 
80% Losses In Investment Portfolios Coming?
"Imagine being a wealth manager out of Geneva in 1912, trying to create a nice diversified portfolio of developed market bonds, and emerging market bonds .. Say 39% of client assets would be split between stocks of Great Britain, France, German Empire, Austria-Hungary and Italy: truly mature, developed markets. Some 21% of assets would go into stocks of the two fastest growing economies: Russian Empire and North American United States. The wealth manager might also put a smidge into emerging economies like Argentina, Brazil or Japan. In bonds, allocation would be somewhat similar. Gilts with sub-3% yield would be the benchmark, with the rest of developed and emerging bonds trading at a spread. Alternatives investment could be in anything ranging from arable land in central Russia or the Great Plains, to shares of new automotive or aeroplane startups in Europe and America, to Japanese manufacturing ventures .. What we are seeing right now, unfortunately, is stagnation. The growth rate is zero for developed markets. That is the precipice. That is the trigger point for the financial system to start suffering shocks .. Global trade volumes in the past 18 months have gone nowhere. Pure import and export trade is not growing. It's at zero, which kind of tells you that if trade is flat where does the GDP really grow on? And most of the time it's just gathering expenditures. That is obviously a non-sustainable situation .. A non-sustainable situation needs a trigger point or a flash point before it can really erupt. There's plenty of flash points; political, military, economic, social. They are just not triggering yet. But they will at some point. Frankly, the situation that we have right now could be just like 1912."
- George Sokoloff, founder and CIO of Carmot Capital
LINK HERE to the article

No comments: