sovereignman.com / By Tim Price / December 4, 2012
If you want to send a roomful of 100 wealth managers into an icy chill, have Russell Napier address them. This is exactly what happened at Citywire’s Smart Beta retreat at the Four Seasons Hotel in Hampshire recently.
Napier’s presentation, “Deflation in an Age of Fiat Currency,” is thought-provoking, and the precise polar opposite of investing as usual. A wry and picaresque speaker, he starts with some conclusions. Among them:
- To reach record lows [akin to those on offer in 1921, 1932, 1949 and 1982], US equities will have to fall by more than 60%.
- Central banks are straining to produce inflation, and developments in emerging markets (i.e. China) suggest a deflation shock is now likely.
- The capital exodus from China is disrupting the creation of inflation.
- In the search for yield, cash is trash ‚ so now is the time to own cash. (This is an example of his dry contrarianism.)
- US Treasuries could repeat their 83% price decline of 1946-1981.