atans1

Rothschild’s a bear

In Financial competency, Financial planning on 15/08/2018 at 4:43 am

Among his past good calls was his call years ago, at the beginnings of the US shale gas revolution, that this would transform the US, making it a great place to invest in US based industries that used natural gas.  

Lord Rothschild’s remarks on markets are always worth reading. First, he knows how to make money. RIT Capital Partners, the £3.2bn investment trust he chairs, has returned an average of 12.6% a year since flotation in 1988, which is excellent going for a defensively managed fund. Second, a substantial chunk of his personal wealth is held in RIT. His 18% stake is worth a cool £575m. Third, he gets to the point.

Rothschild has sounded progressively bearish since late 2015 but he took caution to new extremes in Tuesday’s report to shareholders. “This is not an appropriate time to add to risk,” he wrote, citing high stock market valuations, the length of the bull run (10 years, a record), and the end of the era of quantitative easing.

Then he offered a list of familiar worries: the eurozone; trade wars; the effect of higher US interest rates on emerging markets, with the currencies of Turkey and Argentina being early casualties; and Brexit, North Korea, the Middle East and populism. His key point is that the 9/11 terrorist attacks in 2001 and the 2008 financial crisis provoked a common approach from world powers, but it’s hard to imagine the same response today. His conclusion was almost alarmist: “This puts at risk the post-war economic and security order.”

For its part, RIT is keeping a very low exposure to stock markets of just 47%. Warren Buffett, the most successful investor alive today, is similarly in risk-off mode as he sits on large sums of cash and grumbles about how everything is too expensive to buy. Take note of these octogenarians. They have seen a few market cycles.

https://www.theguardian.com/business/nils-pratley-on-finance/2018/aug/07/rothschilds-caution-reaches-new-extremes-warnings-nils-pratley

  1. He’s a bit too early, but then again most smart investors are usually early in macro calls. There’s still gonna be an irrational bull phase over the next 6-12 months. Not all sectors or companies will benefit though…

    Now the only question is whether the next bear is going to be another negative 50%-60% or a moderate -30% to -40% drop. For developed markets, I’m leaning towards the latter.

    Whatever …. after the next bear, the stage will be set for a very long secular bull cycle. Most millennials & Gen X will remain on the sidelines for many years to come.

    And 47% equities is not exactly super-bear for an oldie. Plus who knows how much more % he has in other risk assets like property, commodities, forex, gold. 🙂

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