Felix Zulauf

Re: Felix Zulauf

Postby behappyalways » Thu Nov 26, 2020 1:15 pm

Economic heroin and financial markets

The authorities have made the financial markets dependent on their stimuli. But despite the flood of money from the Federal Reserve, there is a threat of a credit crunch in the USA. The downturn will result in even more extreme measures.

Felix W. Inflow

Monetary and fiscal policy offer instruments to be able to intervene in a real economic crisis. That is exactly what those responsible around the world have done since the outbreak of the corona crisis in the spring, when the lockdown ordered by the governments caused the incomes of millions of companies and employees to collapse, in some cases drastically.

The only problem with this is that these instruments have been abused massively for thirty years and have therefore become partially blunt as weapons today. If zero or negative interest rates dominated even before the crisis, interest rate policy can no longer achieve anything. In Europe in particular, it has been primarily used this day to keep the incorrect construction of the euro alive.

The loss of income from many companies, from small to large, has massively weakened their financial situation. Correspondingly, companies now have to repair their balance sheets. That is only possible by reducing costs. Investment projects are being postponed, research is being reduced, advertising is being shut down and jobs are being cut.

One's costs are the other's income

Since the costs of one are the income of the other, these weakens the incomes and confidence of entrepreneurs and consumers. Therefore, after the first recovery from the economic slump, driven by easing, a stagnating or retarding economy can now be expected.

This is all the more true as we in the USA have the paradoxical situation that despite a large glut of money from the US Federal Reserve, the banking system, which knows the actual business figures of its customers better than outsiders, has become very restrictive in Lending and is now producing a credit crunch which has a negative impact on the financial markets worldwide.

This is problematic because the big money creation takes place in the banking system and not in the central banks, which many investors do not understand. Banks use a loan to create deposits that can be spent on investments or consumption.

Central banks pump money into the banking system, but what happens to the money is beyond their control as long as they operate as they have before. In spite of the many state-guaranteed lending, the large amount of money remained largely in the banking system and, paradoxically, inflated share prices via the arbitrage mechanism.

The economy will not reach the level of 2020 until 2025

The looming credit crunch in the USA is weakening the economy, strengthening the dollar again and leading to lower share prices. Coupled with stagnating population growth and aging, the economic outlook remains dark. I assume that it will take at least five years before the level of economic activity in the western industrialized countries of early 2020 is reached again.

The current correction could therefore take longer and go deeper than the consensus believes, if there are fluctuations. In Europe, the banking system is ailing, which can already be seen from the banking index, which is about to break its own thirty-year low.

And since the ECB cannot cut interest rates any further - they are already counterproductive for the banks - it has relaxed the capital adequacy requirements, which is tantamount to desperate action. The banks do not have enough equity to cope with the write-downs that will be imposed on them.

And they cannot raise new equity, as all of their shares are quoted, some of them well below book value. Such a battered banking system - after all, the heart of every economic system - hardly creates trust.

The economy cannot recover unless the state compensates for the loss of income. We are now prisoners of an economic policy that has been a failure for decades because the instruments intended for a crisis have been misused for ongoing and, in my opinion, completely misplaced economic management as well as for rescue exercises for misconstructed currencies.

Central banks will finance debt

Those responsible at the time acted like drug dealers who drove a potential customer into addiction to the sweet poison. We now have to live with the consequences. In other words, the state will continue to have to make huge deficits to support our system. And the debt is then financed by the central banks with newly created money.

Global credit creation this year is close to 50% of global gross domestic product (GDP) - a new record. Heavily indebted systems have to go into debt, otherwise deflation will break out. The latest figures show that total US debt jumped from 340% of GDP to 415% in one quarter.

In Europe, the total debt is even higher. Private sector debt (excluding the intermediary financial institutions) has also increased from 45% of GDP to 56% in the US. In Europe these numbers are massively higher. France's companies are the worst sinners and were already at 200% before the crisis. This value should now be a lot higher.

So what's next now? It is clear that we will no longer get out of this impasse without harm. In February, before Corona, I wrote an article for The Market with the title “Full throttle into the planned economy” . Now we are already there with government quotas that are over 50% in most European countries, sometimes even significantly higher. The state will have to support until the fear of infection disappears and the citizens behave normally again.

People with a weakened immune system and previous illnesses are of course at risk and need to protect themselves. But the massive scaremongering campaign by authorities, health experts and the media is now a high hurdle for a return to normalcy.

Measures are not a stimulus

Although government debt will increase massively in the meantime, the economy will hardly improve. Because the measures only replace the loss of income that would otherwise have collapsed and are not a stimulus, as is often wrongly mentioned in the relevant media.

The central banks cannot change course either. They will (have to) continue to create money, because if the yields on bonds rise due to increasing issuance of debt securities or deteriorating credit quality, the system would also falter from this side. And who else if not the central banks buy paper with negative interest from countries that are already massively in debt?

This is a very difficult starting point for investors. With good quality bonds, he will make a guaranteed loss over the next ten years in Switzerland, Germany and a few other countries. With lower quality bonds and higher interest rates, there is an enormous risk that the company will not survive in this environment.

With shares, he participates in the productive capital of the economy, which, if the quality is good, can be saved into a new era even in the event of the most extreme upheavals - albeit presumably with significant price drops.

But even here not all that glitters is gold. Despite consistently positive reports from the investment industry, only a minority of stocks have fared well. In addition, even the S&P 500, the best performer of the last few years among the world's major indices, has seen a pronounced up and down slide

in the last three years that should not be for everyone. And if the parameters of the past also apply in the future, then with today's valuations over the next ten years the result will be somewhat less investment income than the dividend itself will bring in. Given the massive fluctuations, this is not an attractive risk / reward ratio.

Bonds outperformed the majority of stocks

The Value Line Index, an equally weighted index of 1,500 US stocks, is now where it was in 2013. The Stoxx Europe 600, which contains the largest 600 companies in Europe, is now trading at the same level as it was five years ago. And the Japanese Nikkei 225 is no further than it was three years ago.

The much touted emerging markets have lost 20% in dollars since their 2007 high. That will hardly make any investor happy. In relation to this, long-term bonds from first-class borrowers have performed much better in the last three or five years - and without any major fluctuations in the wrong direction. But you don't read that in any glossy brochure from investment institutes.

On the other hand, those who selected the good performers among the stocks did much better. It's just not as easy as it is often shown in retrospect. Tesla has meanwhile grown almost tenfold in the last twelve months and has a higher market capitalization than the five largest automakers in the world. This is despite the fact that Tesla only makes a profit thanks to the sale of CO2 certificates and not because of the still deficit car sales.

Stocks like Amazon trade with a price-earnings ratio of over 100. And such disruptors are strengthened by the glut of money that turns their shares into expensive acquisition money thanks to high prices - but practically eliminates competition in some areas, which is undesirable in the long term is. Can all of this continue?

Today's situation is reminiscent of Japan in the late 1980s

Such valuations are reminiscent of past exaggerations, be it TMT stocks of the late 1990s, the nifty-fifty of the late 1960s and early 1970s, or the Japanese Nikkei of the late 1980s. He also traded with a P / E ratio of 100. The constellation then has a lot in common with today. All central banks, including the Japanese, pursued a very expansionary monetary policy as a result of the stock market crash of 1987.

And comparable to the massive share buybacks in recent years, Japanese companies bought each other's shares, took them off the market and tightened supplies. And all of this on credit, as in the past few years when many companies bought shares with new debt and thus put their balance sheet into perspective.

The turning point in Japan came when corporate debt became so great that they either had to fix their balance sheets or fear for their survival. The slight increase in interest rates by the Bank of Japan at the time was not the actual trigger for the subsequent bear market, but the changed behavior of companies.

Then the game was over. The Nikkei plunged from 40,000 to 7,000 over the next fifteen years and is now, thirty years later, just under half of its then high. An entire generation of traders and investors got rich in Japanese stocks, convertibles and options in the years before the bubble burst.

Excesses correct themselves

Many have lost most of it. Because as an investor, you have to know how far advanced the cycle is. The current cycle is very old. Renewed fiscal and monetary policy impulses can lengthen his life, but excesses always correct themselves in the long term. Even if our authorities continue to administer economic heroin to the system like drug dealers.

Even gold is not a one-way street and is exposed to large fluctuations at times - and this is again the case now. But unlike the S&P 500, which has doubled as the top performer among major stock indices over the past twenty years, gold has increased sevenfold.

The yellow metal is the gauge of capital's confidence in our central banks and governments. Since these will continue in the future as they have been since the 2008/09 crisis or even increase their stakes - they no longer have any room for maneuver without triggering an even bigger crisis - gold will probably continue to perform better than stocks over the next five to ten years - unless investors find the stock pearls, which can significantly increase their sales and earnings even in the most difficult economic environment.

The next attempt at the top comes when the authorities launch the next massive push on monetary and fiscal policy.
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Re: Felix Zulauf

Postby behappyalways » Fri Feb 19, 2021 2:23 pm

Felix Zulauf’s Guide to ‘Crazy’ Policies, Investment Bargains, and Bitcoin Mania
https://www.barrons.com/articles/felix- ... 1613681323
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Re: Felix Zulauf

Postby behappyalways » Tue Mar 02, 2021 1:43 pm

Interview with Jeffrey Gundlach & Felix Zulauf 2 17 21
https://m.youtube.com/watch?v=XzQXfDVsqBI
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Re: Felix Zulauf

Postby behappyalways » Sat Mar 13, 2021 3:11 pm

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Re: Felix Zulauf

Postby behappyalways » Mon Dec 20, 2021 10:20 pm

So, is Felix bullish or bearish? The answer is yes. He looks for the S&P 500 to soar to 6000—but only after a crash to 3000, a plunge of over one-third from here. “It will be exciting for traders, but bad for the passive buy-and-hold investor,” who may not have the stomach for the roller-coaster he foresees, he says.

First, Stocks Will Plunge, Says This Market Veteran. A Huge Rally Will Follow
https://www.google.com/amp/s/www.barron ... 1639754839
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Re: Felix Zulauf

Postby behappyalways » Mon Dec 27, 2021 11:54 am

A good watch


Felix Zulauf’s Big Calls For 2022 And Beyond
https://m.youtube.com/watch?v=Ffth8bSweIs
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Re: Felix Zulauf

Postby behappyalways » Sat Feb 12, 2022 8:23 pm

Felix Zulauf: 20%+ Market Drop By Summer, Then Bull Market Through 2024 Caused By Fed Pivot
https://m.youtube.com/watch?v=k-Cbj-HhgFw



Felix Zulauf: Best Assets For An Increasingly Volatile Market
https://m.youtube.com/watch?v=37wRuaIU3zI&t=1476s
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Re: Felix Zulauf

Postby behappyalways » Mon May 16, 2022 12:13 pm

Felix Zulauf, Zulauf Consulting

Nothing is linear. Things progress cyclically, as determined by greed and fear.
There is a business cycle up-wave, then a bear market down-cycle.
Government fiscal stimulus has caused supply-side distortions. Because of the inability to meet the quick increase in demand, we got inflation.
Money printing by the Fed only postpones our problems.
The Fed is attempting to regain its credibility. There is a big risk that inflationary psychology becomes embedded.
The Fed must bring down demand, yet that will damage the economy. Jay Powell is not Paul Volcker.
QT is the reduction of liquidity and we will get a liquidity crisis at some point. Will the blow-up this time be in Turkey or Hong Kong? We don’t know.
He believes there is more room on the downside.
We will see a big bull run in equities if the Fed U-turns.
He sees a peak for now in commodities, and he’s bullish on commodities and agriculture commodities longer-term.
On gold: He’s bullish long-term, while he believes the short-term trend is lower. He thinks gold will rise when faith is lost in authorities and the system itself, which will start in 2024.
He sees more upside in yields and the dollar, and expects inflation to continue into the mid-2020s.
He expects a rollercoaster ride in the markets over the next 10 years.
In reference to bonds and equities, he said you must be aligned with the main trend and the trend is bearish.
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Re: Felix Zulauf

Postby behappyalways » Thu Dec 08, 2022 9:20 pm

Felix Zulauf: What I Think Will Happen in 2023
https://m.youtube.com/watch?v=lbIS6rmeKRM
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Re: Felix Zulauf

Postby behappyalways » Sat Dec 10, 2022 10:14 pm

A good watch


Felix Zulauf: Credit Meltdown Will Force The Federal Reserve To Backtrack On Tight Money Policy
https://m.youtube.com/watch?v=L3E4iIoi_UY
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