Financial Crisis Yes or No, Readers’ Views / Collective Outrage

Dear Ladies and Gentlemen

Today I would like to share some readers’ feedback on my question from two weeks ago: “are we going to see another Great Financial Crisis, or will we see perfect markets for another decade?

Now, the consensus certainly is going into the somewhat expected direction of “difficult markets”. One of the only contrarian views came from my good friend Andy, CIO of a large Swiss pension fund. The reason for this can be found in the fact that Andy enjoys great insight into the world of Swiss pension funds, which ranks among the largest on a global scale. As CIO of a multi-billion fund he shares the concerns of the entire industry on missing returns from fixed income and (these days) even on new investments in real estate. One of the alternatives still delivering positive cash returns (no matter the volatility) can still be found in equities markets.

And you know what, Andy has a point, with a cumulated cash position of roughly CHF 65 billion the Swiss pension funds lose millions in negative interest rates every month and this “cost” is born by us, i.e. the pension fund policy holders. Please think about it, Ladies and Gentlemen.

My friend Robert is seeing a crisis at the horizon but is careful about any timing indication as this is difficult if not impossible to foresee. The main arguments for his scenario are inflation, rising interest rates and a massive currency devaluation, which according to his views will become a problem for a long time.

John also sees another financial crisis approaching. He argues that not only the problems of the last crisis have not been addressed adequately but on top of that the steep increase in global debt levels have made them even worse. David certainly shares that view and sees inflation and rising rates and a massive currency devaluation and thus sees no chance that the new decade will be anything like the last one. He adds that the already crippling burden of insurmountable debt is increasing by the day; the demographic outlook in advanced economies is grim; democracy is being rendered dysfunctional by political ineptitude and polarization and that domestic unrest and international confrontation do not augur well for a global economy kept afloat by absurdly low interest rates and the deluge of liquidity created out of thin air. Wow, what a statement.

Thank you very much, Gentlemen (there were unfortunately no Ladies offering any feedback) for submitting your views on the topic. Due to the format of this weekly mail I was unable to publish all the answers I had received, but I think I covered most of the views that were shared with us. Please keep it up.

Now, debt is of concern to many of my readers and I certainly share a lot of sympathy for these concerns, but maybe I am missing a point?

Next week or the week after I would like to look at a phenomenon which bothers me more and more. I am thinking of what I would call “collective outrage”. Please feel free to already send in your views to this or just wait and reply to my thoughts. In any case, if you are sharing your view points, please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

Ladies and Gentlemen, I wish you a great day and weekend.

Kind regards.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li
Web: www.incrementum.li