"Tsunami of new government debt": Fund manager Peter E. Huber also believes white swans are dangerous

“Black Swan” author Nassim Taleb recently described the escalating US national debt as a “white swan.” Fund manager Peter E. Huber also believes that white swans can be dangerous.

• “Black Swan” author Nassim Taleb warns of escalating US national debt
• Peter E. Huber: “White swans can also be dangerous!”
• Stock markets are drifting apart

Nassim Nicholas Taleb, the author of the bestseller “The Black Swan”, warned in his 2007 book of unforeseeable events that, although very unlikely, would have a massive impact on the world Financial markets if they did happen. At the beginning of this year, the market expert warned of a “white swan” – a risk that is easier to predict and is more likely to occur than a “black swan”, but which can be just as dangerous for the markets. In this case, Taleb spoke specifically about the escalating US national debt, which could develop into a debt spiral – and a debt spiral is “like a death spiral,” according to the “Black Swan” author.

Danger of a debt crisis

Fund manager Peter E. Huber also believes that white swans can be dangerous. In an article that appeared on the website “Huber’s Portfolio” at the beginning of February, he writes that “we are currently facing a tsunami of government spending around the world New debt“In the USA, a budget deficit of 1.8 trillion US dollars is expected this year and a similar picture emerges for Europe. According to Huber, in Germany, France, Italy and Spain alone, new bonds worth 2024 will have to be issued 1.1 trillion euros will be spent. “We don’t even want to talk about the gigantic sums of old bonds that are expiring and have to be refinanced,” continued Huber. Since the new bonds have to pay significantly higher interest rates, the interest burden also increases The states are clear. For Huber, however, it is unclear who should buy the bonds. He does not believe in China, India or Saudi Arabia after they have seen “that the Americans are using the dollar as a weapon by freezing Russian central bank balances.” Meanwhile According to Huber, the banks have already stocked up heavily on “risk-free” government bonds and are sitting on “huge unrealized losses.” Therefore, the danger of a sovereign debt crisis “cannot be dismissed out of hand.” The fund manager expects that ultimately “probably “Central banks will have to act as last saviors again, even though they have promised to reduce their bond holdings.”

Possible consequences for the markets

According to Huber, this could result in “a loss of confidence in monetary stability and a flight to real assets such as stocks and gold” for the markets. Clever sovereign wealth funds have been increasingly investing in stocks for some time, as the fund manager writes. The expert and his team are skeptical about the “renaissance of the bond markets,” which has often been predicted. The 30-year cycle also speaks against this.

Meanwhile, despite the long-term price potential, there are enormous risks on the stock markets in the short to medium term. “Various sentiment indicators such as the market risk barometer signal considerable optimism and many stock exchanges are trading at historic highs. This does not fit with economic developments. We expect that the profit margins of many companies will come under significant pressure and that this is not due to economic reasons but is structurally caused,” said Huber, who warns that there is little hope that the economy will recover quickly.

Positioning on the stock market

The stock market expert, who invests with the countercyclical wealth fund Huber Portfolio SICAV “worldwide primarily in strong value stocks and turnaround situations,” as it says on the Taunus Trust GmbH website, explains in his article that “value stocks with intact growth potential “relatively speaking, they have become increasingly cheaper”, while “highly valued shares of companies that supposedly belong to the future” are becoming more and more expensive.

“There are currently only a few stocks on the stock market that benefit from the megatrends of artificial intelligence or the fight against obesity. Accordingly, the valuations of the corresponding stocks have increased and the potential for disappointment has increased,” says Huber.

“Long-term attractive investment themes” can therefore be found “apart from the current market consensus”. Two possible megatrends for this decade are the Asian markets, which are expected to have “significantly higher long-term growth potential”, and energy and raw materials stocks, which should “benefit from the sharp decline in investments in the development of new reserves since 2014”. In Asia, Huber explains, “we have been particularly heavily invested in Japan for a long time.” Meanwhile, there is an “interesting constellation” on the raw materials markets that the price of gold remains above the $2,000 mark and is therefore close to its highs, while “gold mines are in a long-term downward trend”. “This is not intended to be a purchase recommendation, but it does indicate a serious imbalance that could resolve itself at some point,” says Huber.

Editorial team finanzen.net