12/16
Our Point of View, December 31th 2016
7
And first of all this:
Donald Trump’s election victory was
foreseeable
8
Casino Royal
The hair-raising conduct of the
central banks
10
Something is rotten in the state Signs of a bond market reversal
of Denmark
13
Same old story
Inflation rises from the ashes
15
Are they allowed to do that?
The EU: a flawed concept
17
It won’t be boring
Looking ahead to the New Year
Our point of view, 31 December 2016
____________________________________________________________________________
Performance of the world's major stock markets
A) January 1, 2016 - December 31, 2016
Switzerland
Germany
France
United Kingdom
Sweden
Europe
USA
SMI
DAX Xetra
CAC 40
FTSE 100
OMX Stockholm 30
STOXX 50
S&P 500
Nasdaq
Japan
Nikkei
India
Sensex
China
Enterprise Index
Morgan Stanley
World Equity Index
Bloomberg Effas US$ Bond Index (5-7 years maturity)
Balanced Mandate Index *
+
+
+
+
+
+
+
+
+
B) Over five years
Switzerland
Germany
France
United Kingdom
Sweden
Europe
USA
SMI
DAX Xetra
CAC 40
FTSE 100
OMX Stockholm 30
STOXX 50
S&P 500
Nasdaq
Japan
Nikkei
India
Sensex
China
Enterprise Index
Morgan Stanley World Equity Index
Bloomberg Effas USD Bond Index /5-7years maturity)
Balanced Mandate Index *
*50% Morgan Stanley World Equity Index and
50% Bloomberg Effas USD Bond Index (5-7 years maturity)
6
+
+
+
+
+
+
+
+
+
+
+
+
+
in USD
in local terms
9.28%
3.30%
0.49%
5.20%
2.78%
3.26%
8.50%
6.26%
3.84%
0.26%
2.78%
4.46%
1.41%
2.94%
+
+
+
+
+
+
+
+
+
+
+
+
in USD
in local terms
27.78%
58.41%
25.23%
2.03%
16.31%
15.60%
78.02%
106.63%
49.22%
34.59%
5.30%
48.08%
7.48%
27.78%
+
+
+
+
+
+
+
+
+
+
+
+
+
6.78%
6.87%
3.96%
13.85%
4.86%
0.08%
8.50%
6.26%
0.42%
2.57%
2.74%
4.46%
1.41%
2.94%
37.47%
94.65%
53.88%
28.19%
53.59%
42.04%
78.02%
106.63%
126.06%
72.28%
5.45%
48.08%
7.48%
27.78%
Our point of view, 31 December 2016
____________________________________________________________________________
AND FIRST OF ALL THIS:
Donald Trump’s election victory was foreseeable
____________________________________________________________________________
Foreseeable? In our last report, we explained why an election victory for
the outsider Trump would chime with the times.
Yet the world was flabbergasted on the morning of 9 November to find
that the unimaginable had become reality. “How could he have won the
election?”, “there must have been a mistake” and similar expressions of
disbelief abounded, clearly demonstrating how much the opinion of a naive
public can be manipulated. Once again, the league of pollsters, who only
ever publish what they want to publish, backed the wrong horse, as they
did for the recent UK parliamentary elections and Brexit referendum. If
Marine Le Pen becomes the president of France and the right-wing AfD
wins seats in the forthcoming German elections, we will see more of the
same shock and disbelief. Yet the writing is on the wall: the population is
fed up with self-serving politicians who govern by disregarding the will of
voters. If anyone feels that we are overstating the case, let us give you a
flavour – albeit with a bitter after-taste – of how the rather useless
European Parliament has failed to hear the warning bells. We quote JeanClaude Juncker, who acts like the monarch of the EU and often imparts
wisdom when he is clearly over the legal limit. Common sense is not
complicated: every now and again comments made by powerful
individuals stick in the mind. The author has an elephantine memory; back
in 1999, Jean-Claude Juncker said:
"We decide on something, leave it lying around, and wait and see what
happens. If no one kicks up a fuss, because most people don't
understand what has been decided, we continue step by step until there is
no turning back."
It is fortunate that Mr Juncker is so fond of a drink, because no eminent
politician would usually make that kind of comment on the record. But
truth comes from the mouths of children and drunkards, and Mr Juncker
has openly admitted how Brussels operates and will continue to operate.
Read his comments again. You will find it very much worthwhile. The
remarks are brimming over with ingenuous arrogance. Washington has
been dominated by the same kind of attitudes, as have Berlin, Paris, Rome
– and the list goes on. Even our little capital city of Berne.
7
Our point of view, 31 December 2016
____________________________________________________________________________
So when the population has an opportunity to vote, then no one in this day
and age should really be surprised to find public opinion delivering a
devastating blow. Every so often, the subject of Switzerland's “special”
direct democracy comes up in Germany. Mama Merkel and her gang really
don’t like the idea: it would be asking too much of citizens.
Donald Trump will undoubtedly be surrounded by technocrats who will
manage day-to-day affairs. Nevertheless, Europe needs to brace itself for
the fact the US is no longer interested in bearing the brunt of strategic
defence for Europe. Russia and China will win more elbow room as the US
develops isolationist tendencies. But life will continue as before under
Trump, who has a majority in Congress, which might allow him to
outperform current expectations. All the same, Trump’s election victory
was the second electoral bolt from the blue. The Brexit referendum in June
was the first slap in the face.
From now on, the people of the free world will repeatedly and ever more
resoundingly vote the wrong way.
CASINO ROYAL
The hair-raising conduct of the central banks
____________________________________________________________________________
We have watched with incredulity as the world’s largest central banks
steadfastly pursue an unproven monetary theory, even though the
experiment has clearly never been made before and there is absolutely no
evidence that it will have a lasting impact on economic performance. We
can’t help feeling like the alchemists in China over two millennia ago, who
dispensed cinnabar as the elixir of life, guaranteeing immortality. The elixir
created a brief sense of well-being – before the mercury content inevitably
poisoned the recipient. We will soon see the same tale repeated in the real
world of money. The monetary easing policies introduced by the central
banks in the wake of the 2008 banking crisis improved market stability and
confidence. Nevertheless, we feel that the gradual proliferation of central
bank stimulus measures, culminating in zero interest rates, will have
unjustifiable and damaging long-term effects that are currently being
ignored and downplayed. Whether or not it was reasonable to cut interest
rates to zero in order to stimulate demand is once again the subject of
8
Our point of view, 31 December 2016
____________________________________________________________________________
intense debate. Yet several countries have imposed negative interest rates,
which is not only unprecedented, but also a scandal from a social policy
perspective. In a system driven by consumption, savers should not be
penalised while borrowers benefit from minimal lending rates. In the Swiss
canton of Zug, the cantonal government no longer pays interest on tax
prepayments and – incredibly – no longer charges interest on arrears. It’s
official: a lax attitude to debt is now desirable. The state would rather give
the blame for negative interest rates on accounts to late payers rather than
blame the public purse.
Let’s set aside the impact on attitudes to paying tax. These examples
demonstrate that not only is the state massively penalising citizens by
paying zero interest on savings and negative rates on pension assets, it is
also profiting from the unspeakable act of unashamedly releasing 30-year
Confederation bonds onto the market, which offer a juicy negative yield
and are in high demand among our pension funds. This move is certainly
not intended to benefit our younger citizens.
In the meantime, the Swiss National Bank has amassed balance sheet
assets worth approximately CHF 800 billion by manipulating exchange
rates, which amounts to a whopping 125% of national economic output, a
record level. Billions of bonds have been and are being purchased, while
our central bank is also a major shareholder in Apple, Google and a
multitude of other high-ranking brand names. At the end of the year, a
steep profit is reported, with national and cantonal governments wrangling
over the division of spoils. It is Monopoly money pure and simple. Mario
Draghi, the King of the European Central Bank, has been almost maniacal
in his approach to bond market intervention. The only problem is that there
are hardly any securities left for sale. So Draghi is buying up securities with
negative yields at any price. “Down with interest rates!” he declares, while
preaching the benefits of higher inflation. Yet inflation refuses to move
towards the 2% target set by Frankfurt. And what about Japan? The head
of the Bank of Japan is currently flirting with the idea of buying up all
government bonds. He will probably win the Nobel Prize for monetarism
gone mad at some point. Every day, vast quantities of bonds and equities
are stolidly pumped up, while the fact that inflation looks set to rear its
head again is virtually ignored. The effects of inflation have not yet begun
to be felt in daily life. As European consumers are still incredibly priceconscious and are saving despite the zero interest rates, the ECB has
taken the trends as a mandate to maintain the far-reaching stimulus
policies. We would question whether this is wise or even advisable given
the very modest signs of inflation that are emerging.
The truth is that the central banks’ experiment has long since reached its
limits and appears to be harmful. Savers are effectively losing money, the
9
Our point of view, 31 December 2016
____________________________________________________________________________
banking sector is under pressure – we have limited sympathy for their
plight – and visible political and technical opposition is emerging. It is pretty
clear that the machinations of Mario Draghi and his ilk will soon come to an
end. But what will that mean for us as investors?
SOMETHING IS ROTTEN IN THE
STATE OF DENMARK
Signs of a bond market reversal
____________________________________________________________________________
The anticipated end will undermine the decades of bond market gains,
with the focus shifting onto the here and now. Admittedly, the duration of
this massive uptrend has long been underestimated by all market
observers, including us. We have seemed to be on the brink of a reversal
in bond yields on numerous occasions, but central bank stimulus
measures have repeatedly postponed a return to normalised interest rates.
Quantitative easing has become a religion, while central bank
independence has waned in favour of political connivance. The EU and
Japan seem to be particularly defiant in the face of a gradual return to
normality, but the Draghis of this world may have overlooked the forces on
the financial markets. The Swiss National Bank is also implicated in this
serious situation, as indicated above, with its miraculous gains likely to be
transformed into tangible losses very soon. The flow of Monopoly money
from our national bank will then dry up. By way of consolation, this will
probably mean an end to the construction of massive obstructions in the
form of roundabouts in every backwoods corner of our land.
The financial markets are strange beasts. Their behaviour tends to be
based on logic and facts. But every now and again they act like a
hormonal teenager: incomprehensible and wildly unpredictable.
Meanwhile, the captains of the central banks are academics and are
confident that their logical arguments will produce predictable results. They
believe that unbridled monetary stimuli will keep the stock exchanges
sweet for ever. Our lords and masters would be well advised to include
staff in their retinue who have previously lived in the chaotic world of the
trader. Traders are rarely, if ever, theoreticians. They are people with a
10
Our point of view, 31 December 2016
____________________________________________________________________________
nose, a gut feeling, primal instincts and often closest to the archetypal
street fighter. Basically, they are people with a flair, who couldn’t care less
about concepts like the mathematical formulas for quantitative easing.
Reversals are often triggered by a move among these professionals, who
abandon certain investments before logic dictates any such shift and who
don’t maintain investments just because they have generated massive
gains on paper. We feel strongly that this accurately describes the current
situation: professional traders are abandoning long-term bond
investments. The zero interest policy is still in force, with central banks in
Europe and Japan keeping the pedal to the metal, but the markets are no
longer willing to play ball. The mask is slowly but surely being stripped
away, revealing the folly of untrammelled stimulus policies. Anything that
makes no sense is folly. End of story. Believe you me, if you had to choose
between a central bank chief with academic distinctions and a trader with
only a basic education to advise you on financial market reversals, you
would do well to avoid the gentry from the upper echelons. That is what
we do. We apply common sense; our investment policy is dictated by
people who stare at screens day in, day out and have a feeling for where
market trends are headed. The markets are no longer willing to play ball.
The markets are fed up. They are fed up with experimental financial
policies; of long-term bonds that are guaranteed to generate losses; of
governments who crank out new bonds and foist overbearing conditions
on investors that guarantee capital losses instead of generating yields. The
merry-go-round of folly has run for long enough now. The population
watches mutely as they are dispossessed and central bankers are amazed
to find that their subjects would rather save than spend, despite all the
lovely cheap money. Welcome to the world of Ivy League logic. Instead of
organising conferences on monetary policy, central bankers should take to
the streets and ask average citizens why they are so worried about their
future. These millions of citizens are not being paid bonuses – they are
watching interest being deducted from their pension assets. The pitcher
kept being taken to the well, until it broke. Draghi and his counterparts can
stimulate until they are blue in the face: their measures will have no effect if
the financial market and investors dig in their heels and go on strike. The
US Federal Reserve is preaching the immediate abolition of cash with
missionary zeal. Interest rates could then be slashed to 3% below zero and
unruly citizens would be unable to withdraw their money from the bank.
This is the kind of eleventh-hour stunt we can expect, but it is probably too
late. Let’s take a quick look at the charts showing the current state of the
bond markets:
11
Our point of view, 31 December 2016
____________________________________________________________________________
The charts clearly show how long the bond uptrend has lasted. The
decline in yields and the rise in prices are huge, while the impending trend
reversal is not immediately apparent from these long-term charts.
We have therefore included the charts for the past 12 months, which
clearly show that it is game over for the central bankers' stimulus
measures.
12
Our point of view, 31 December 2016
____________________________________________________________________________
If our assessment is correct, and the bond markets are currently
undergoing a trend reversal, then the gap between short and long-term
maturities will widen. The impressive book profits on bonds will dwindle
rapidly. At the moment it is difficult to predict how long Europe and Japan
will continue with their stimulus madness. However, we feel that the bond
market is likely to turn first, with short-term yields rising only tentatively.
Viewed on an absolute basis, yields will remain low and equities will still
offer more attractive returns (dividends) for some time. We believe that the
bond bubble that has formed in the past year has now reached ridiculous
dimensions.
Portfolios in Swiss francs that move out of bonds will be presented with a
dilemma: disposal gains can only be invested in short-term time deposits
with negative interest rates, as many private banks apply negative interest
rates to cash balances. The situation facing Swiss investors – negative
interest rates and tax on assets, plus bank and management fees –
amounts to a policy of expropriation and cannot be too severely criticised.
Naturally, your asset manager or advisor will argue against realising bond
gains, because doing so almost inevitably entails increasing the equity
weighting. That is a tough decision to take, but ultimately creaming off the
juicy premium on bond prices should pay off.
SAME OLD STORY
Inflation rises from the ashes
____________________________________________________________________________
How often in previous decades have we read that things would be different
this time? That the traditional rules no longer applied and now belonged on
the dusty back shelves of a museum or library? Do you remember
Japanese property prices in the 1980s, when the site of the Imperial
Palace was worth more than the whole of California? Do you remember
the oil price extrapolations, when forecasters claimed that Saudi Arabia
would be able to buy up the US? Or the dotcom bubble, when rumours
circulated that the P/E ratio for new economy stocks was irrelevant, given
the infinite exponential growth?
Every time, we were told that everything had changed overnight. The same
is true of inflation and the fairy tale that frenetic monetary easing based on
the untested zero interest policy would generate purely positive benefits,
13
Our point of view, 31 December 2016
____________________________________________________________________________
making inflation old hat. “It will be different this time.” We were promised
that globalisation would bring long-term deflation, China would flood the
world with cheap products for all eternity, the Internet would provide
ultimate price transparency and thereby lower prices – all of which would
mean the lasting death of inflation. Everything is different now, we were
told. Throw out your economics textbooks.
But history shows that excessively expansionary monetary policy always
pushes inflation up. Young graduates with carefully gelled hair and limited
work experience can argue the contrary as much as they like: inflation has
furtively yet consistently risen in the eurozone over the last few years.
Admittedly from low, or even negative, starting levels. Within the eurozone,
inflation is currently at least 0.5% and as such at its highest level since
mid-2014. In the US, core inflation rose to 1.7% in the third quarter of
2016, leaving the Fed with no reason not to make further rate hikes.
We think that the inflation factor is sorely underrated at present. When
inflation fell across the board, there were wails of lamentation at the
prospect of a deflationary crisis. Acting primarily in the interest of Wall
Street, politicians and central banks were encouraged to turn the monetary
tap on full. Which they did. As a result there was more toy money, the
stock exchanges rejoiced and property prices climbed to ever loftier
heights amid ultra-low borrowing opportunities. Yet now, as it emerges
that inflation is still alive and stimulus measures need to be curbed, those
who benefited from the cheap money policies have fallen silent. They are
extremely worried that the craze for printing money may end, leaving the
flow of toy money to run dry. The mantra that the old rules are obsolete
and the glut of money has no impact on inflation no longer sounds
convincing. There is nothing new under the sun. Monetary policy wrongs
have never gone unpunished before, and will not go unpunished this time.
So let's be patient with our holdings of gold and keep a very close eye on
bonds with long maturities. Let's not even mention securities with unlimited
maturities, i.e. money that never has to be paid back to the investor. There
was a 10% correction in gold prices at the end of 2016, but the yellow
metal still put in a gratifying performance over the year. Is this a leading
indicator pointing to a resurgence of inflation? Maybe.
14
Our point of view, 31 December 2016
____________________________________________________________________________
ARE THEY ALLOWED TO DO THAT?
The EU: a flawed concept
____________________________________________________________________________
The debates in the European Parliament reveal how out of touch they are
with reality and occasionally remind us of a comment made by Emperor
Ferdinand I during the revolutions of 1848. When he saw his citizens
protesting, he muttered “Are they allowed to do that?” The modern
European revolution is not happening on the streets, but at the polling
stations, where the revolt is dropped anonymously into ballot boxes. The
referendum on Brexit should not have happened, yet it still became a
reality and confirmed the opinion of many callow European politicians: that
direct democracy should be banned. You just can't trust the voting public.
There is an unmistakable fear of imitators. Quite rightly. Euro-sceptic
parties are in the ascendant: all eyes are turned, spellbound, to events in
the Netherlands, Austria and France. The disconnect between self-serving
politicians and the wilful population of the old continent is increasingly
taking disturbing forms. The Juncker elite’s aspirations of creating an ever
closer union among the peoples of Europe, as defined so grandiloquently
in the Maastricht Treaty in 1992, are gradually being relegated to the status
of a utopian dream. “Hungary and Galicia, unite!” is this week’s joke. Yet
Brussels remains obstinately oblivious to reality and is now almost an
autonomous caste of historical delusion. It is high time Brussels
understood that the common denominator for all European countries is the
basic principle of the single market. This is as true today as it was in 1951
when the European Coal and Steel Community was formed. Nevertheless,
Brussels is labouring slowly but surely to build a United States of Europe,
which has created insurmountable problems. Having the euro as a single
currency is essentially unrealistic and economically counterproductive.
Countries with completely different economic and political approaches
have been wed in a currency union, despite the fact that each has their
own monetary, fiscal and economic policies. The euro was a bold venture,
but instead of uniting the Member States, it has now divided them. The
roller-coaster euro ride is not over yet: if the Netherlands, Austria and
France follow the UK’s example, everything will come tumbling down.
Another cardinal issue currently taxing the EU is the free movement of
persons. Brussels dreamed of the united brothers and sisters of Europe,
but it was just a utopian ideal. The citizens of Europe have absolutely no
intention of surrendering their national sovereignty. An Italian citizen would
rather die than exchange their passport for an equivalent issued by
15
Our point of view, 31 December 2016
____________________________________________________________________________
Brussels. The EU’s insistence on freedom of movement of persons was
the main driver for the Brexit vote.
Although there is little crossover between the two issues, they are
nonetheless closely related: unfortunately, both presuppose a future
European state that simply cannot and will never exist. This report has
already used some quotes to illustrate how politicians like Jean-Claude
Juncker tick. Oblivious to the outside world, our lords and masters keep
creating facts and trying to crowbar a European social union into being. If
the political elite in Brussels does not abandon the master plan and
continues to ignore clear messages from national populations, that
crowbar is set to fall on the heads of Juncker and his entourage. 2017 will
be an exciting year. François Fillon, a member of the elite political old
guard, looks set to be crowned the new French president soon. Marine Le
Pen has a smile on her face. Mama Merkel is confidently standing for reelection. But she no longer says “You know me”: German citizens now
know just who she is. She can no longer deny her East German past. The
AfD is also smiling. Who is feeling upbeat in the Netherlands? Geert
Wilders, it would seem. We recognised that the American population had
had enough of the smug Washington elite. In June last year we stuck our
necks out and predicted that Donald Trump would win the election. Next
year, various elements of the European population will again vote for the
wrong candidate, and the crowbars will be used to belabour the out-oftouch elite in Brussels. The excitement continues. The euro is a
preposterous and fragile construct. If President Erdogan were to send the
refugees he has been paid to shelter under the refugee deal back across
the Aegean Sea – which may well happen – then exciting will be an
understatement. Not only will the AfD be laughing, they will get to work on
assembling ministers for the next German government.
16
Our point of view, 31 December 2016
____________________________________________________________________________
IT WON’T BE BORING
Looking ahead to the New Year
____________________________________________________________________________
In this publication, we have regularly presented controversial ideas,
marginal political arguments and even outrageous statements – banking
sector, this means you! Only once has an independent third party
contacted us to complain that it is unpatriotic to drag our major banks
through the muck – the muck of the truth. Once again, we have dared to
call a spade a spade. Many millions of citizens are no longer willing to be
ignored by self-satisfied politicians. It is often the minor details that provide
the answer to a riddle. For example, the riddle of why millions of American
women voted for Donald Trump, despite the fact that shortly before
Election Day he was exposed as a chauvinist blowhard who boasted that,
as an American star, he was free to grope women whenever he wanted.
From the outset, the upstart braggart had a guaranteed advantage over
the constantly smiling Hillary, despite her apparent extensive political
experience. We predict that the schoolmarm-like Angela Merkel will also
lose the next election. The overly autocratic Chancellor has been tripped
up by her East German roots. Although she has represented the bourgeois
CDU for many years, her head is still full of socialist doctrine. There is no
other explanation for the extreme naivety of her declaration of an open
door culture. "You know me" she repeatedly cried to voters before the last
election. Merkel was a synonym for dependable. In the forthcoming
parliamentary elections, the German electorate will have those words in
their minds as they cast their ballots. Mrs Merkel has shown her true
colours and so she will not be re-elected. A reliable source in Frankfurt
recently asked us not to send any more Merkel-sceptic comments to their
work e-mail address – at a leading German bank. The messages could
damage his career, he told us. Scoundrels who tweet shocking comments
about the German Head of State, as we do, are apparently receiving calls
– in the best-case scenario – or even discreet visits from a man in a trench
coat to explain that it is now forbidden to disseminate “untruths” on social
media. I ask you: where is this taking us? To Erdoganistan?
The New Year will be very complex for investors. Yet interestingly we have
moved on rapidly from every recent political shock. Let me give you three
examples.
17
Our point of view, 31 December 2016
____________________________________________________________________________
What a surprise. The markets got over the Brexit vote, the end of the world
as we knew it, within a matter of days. The unthinkable Trump election
victory actually ended up boosting the US dollar and the stock market.
2017 will bring a constant succession of similar incidents. We suspect that
the stock exchanges and markets will not remain unaffected, unlike in
2016. No one seriously believes that the Front National will get to form a
government in France; very few people are taking the political trends in the
Netherlands and Austria seriously; not many have factored the
unpredictable Erdogan into their calculations and – hush, whisper it softly –
no one has dared to even consider that Queen Merkel may have to retire in
2017. The interest rate reversal – see our comments earlier – will mean the
loss of the nirvana state for those who have profited from the zero interest
policy. That will have knock-on effects, because addicts get very grumpy
when you take away their dope.
We are surprisingly blasé about the US. Donald Trump, like Ronald
Reagan back in the day, will put together a cabinet of technocrats, himself
taking on the role of talk show host in the style of Schwarzenegger. It
won't be too bad, because Congress will continue to pull the real strings
as always. But at the same time, we should expect the US to become
more inward-looking, ultimately demanding, for example, that the
Europeans revive their moribund little army. It is highly unlikely that Mexico
will find itself hidden in the shadows of another Great Wall, that all trade
agreements will be suspended, that a plethora of coal mines will be
opened and the Pacific surrendered to the Chinese without a fight. Election
campaigns are tailored to the public, certainly not for the annals of history.
The US will continue to get more things right than Europe most of the time.
18
Our point of view, 31 December 2016
____________________________________________________________________________
Europe’s best bet would be to send home all 751 members of the
European Parliament. For good. Ultimately the US economy is doing better
than its rivals, although that doesn’t mean that Wall Street will continue to
advance regardless. If interest rates return to more normal levels, upward
momentum will falter, balance sheets will feel the strain and stock
valuations will seem stretched. The air is very thin up high.
In Europe, Master Draghi is still stimulating with all his might. Here at
home, interest rates will remain low for a while, which will benefit European
stock exchanges. We currently prefer sectors such as infrastructure and
armaments. Some investors find the latter morally questionable. We
respect that attitude, but at some point you have to decide whether you
want to be a moralist or an investor. Objectors might argue “but there
aren’t any wars nowadays”. Is that so? A three-hour flight from your home
will take you to a world war zone: Tsar Putin has already run wild in parts
of Ukraine with impunity. What if Vladimir Putin, despised as he is by
Europe, commits heresy and decides to [re]conquer the Baltic States
tomorrow? Ask yourself: who would send in ground forces to defend the
NATO member states? Maybe Germany (which promised no more wars)?
Italy? Who then? Certainly not the US under Trump. So we should not
underestimate the need to stockpile arms. Like it or not, arms are the
quintessential must-have item.
All the forecasts indicate that we will survive the aftermath of the 2016
shocks and will not be throwing our high-quality equity investments to the
wolves before or after elections in which the voters persist in making the
wrong choices. Bad election results will become the norm, as will sea
changes in the political leadership of Europe. Those who won’t listen must
pay. The Brussels political elite have been wasting time. We hope that not
all of the outlandish ideas in this article will become reality. But it is a very
real danger.
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Our point of view, 31 December 2016
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20