it Would have looked in the summer of last year with a crystal ball into the future, and the serious impact of Corona on the stock markets, you would have probably sold his shares. Rising unemployment, up to two digits, shrink the economy and major political upheaval are certainly not a buy signal. And yet, the stock prices this summer, paradoxically, higher than a year ago. An unprecedented confusion in the money professionals and contact experts.
Although I have advised in this column in March and April for the purchase of shares, but given the sad fundamentals, much too careful. In retrospect, more courage would have been better. In the specialist media, the expert puzzles, so for weeks, increasingly desperate, as you can explain the rising stock prices with something like logic. About the author
Leonhard Fischer, an internationally recognized capital market expert and creative thinker in the financial sector. He began as an investment banker at J. P. Morgan and was only 36 years of Executive Board at Dresdner Bank, later also in the Alliance. He was the CEO of Swiss insurer Winterthur, and the Executive Board at Credit Suisse. In his MONEY column “Created!”, says Leonhard Fischer, valuable secrets around the money system.
To the capital markets is the market economy, abolished
But this is precisely where the Problem begins. How are you supposed to find the supposed logic of the market, there is none. Yes dear reader, no longer life, we, at least, as regards the capital markets, in a market economy. You dawned in the ten years since the financial crisis, only to himself, and then died in the week of the 16th. March, at the height of the corona of a crisis.
cause of death? The massive injection of liquidity by the Central banks. As a result of this money rush, the market passed away peacefully in her sleep, and only remained in the economy. The good news is that we can free ourselves finally from the Desire to have market-based explanations for the behavior of the stock market find. Thus, we can focus now on the reality and not the fairy tale, to understand the price development. Webinar with Marc Friedrich: How do you now protect your wealth
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let’s Start with the financial industry. The boasted in recent decades, in modern risk management investing in. A myriad of people and enormous amounts of money were spent to analyze the risk in the financial markets. A hitherto unprecedented effort.
The success? Less than Zero. Most of the modern risk management systems are based on the so-called Value-at-Risk (VAR) approach. They represent, in my view, more of a danger than a solution. For that reason alone, because to many you are using and exactly to its own forecast to destroy.
The Central banks dominate the market,
What is the real risk model of this bloated financial sector is so? These are the major Central banks of the world, the Mummys, according to which the financial industry calls, in the meantime, the slightest Boo-Boo. The Power of Central banks is your license to unlimited money printing. The exactly and, unfortunately, just that is what keeps since the financial crisis, the capital markets of this world (yet) together. Everything else is talk to the financial professionals to the own Failure to distract.
but How this new Regime works exactly? In the good old world, Central banks set the short-term interest rate. You have influenced indirectly the yield on long-term government bonds. In the Wake of the financial and Euro crisis, this decades-long practice was thrown overboard and the new policy of Quantitative Easing (QE) to be replaced.
Behind the massive purchases hides it is precisely these government bonds to influence long-term interest rate directly. This was the beginning of the exit from the market economy to the capital markets. Since March, this approach has been adopted in the course of the corona crisis new dimensions. First, the purchase of corporate bonds was added, then the so-called Junk Bonds and at the end of April, announced the US Central Bank to buy also often leveraged toxic interest-bearing securities. In this way, the Central banks manipulate the entire market for credit risks, and push all interest rates to Zero.
shares are no alternative to
Left with only the stock remains for the for yield-seeking investors in the market. And so all are forced to buy shares. Yes, dear reader, buy the professional investors share of these days in the first place, because any valuation formula says it is so. No you can buy them, because there are hardly any Alternatives and think of later on in evaluation formula in order to rationalize their Actions, a follow-up. I call this the theory of relative bull hits. And this theory, the following shares are relatively less Bullshit than the other bad Alternative. Therefore, they can be purchased. Point.
I guess, dear reader, that you with these lines, just a queasy feeling. Can go something as good in the long term? Probably not. In fact, the Central banks around the world organize a gigantic Ponzi scheme that must eventually collapse. The emphasis is on eventually. Because this date may be in the distant, distant future, and until then, the investors will be relatively poorer by doing nothing, and it’s off. In a time of expansionary monetary and fiscal policy, the idleness is dangerous. The cash Inflation threatens.
The professionals in the market
that’s Exactly why increased in the last few weeks, the courses are so strong, because the professional money Manager running behind with all your money to the market. The above-mentioned risk concept of VAR has led to the fact that almost all of them had to sell at the low points of the market in March, large parts of their equity positions. Especially bad it has taken some Roboadvisor, have built for me, completely incomprehensible to the whole of your investment policy this risk management of the last century. And now that the share prices almost their pre-crisis levels have been reached, many in a panic and have to buy, because the returns on their investment for the current year are still significantly negative.
My tactical advice to you: use that Moment of the buying panic, to reduce the size of your Position and a few gains from the, I admit, to take unfortunately, prudent purchases of the March.
Central banks and politics to manipulate the capital market,
But? Clearly. The capital markets are manipulated by the Central banks and the policy. Thus, the old rules of supply, demand, and reviews are repealed virtually. The global capital markets today are like Junkies depending on the drug of cheap money and the unlimited balance sheets of the Central banks. So we live in a anarchy, without reliable rules and with an uncertain outcome. All of this can go on for a very long time. Therefore, I stand by my recommendation: A quarter of liquidity, a quarter of Gold and the other half in securities broadly diversified. And hope for the Best.
This article was written by Leonhard Fischer
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