{"id":3116,"date":"2013-06-11T17:27:01","date_gmt":"2013-06-11T15:27:01","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=3116"},"modified":"2013-06-11T17:27:01","modified_gmt":"2013-06-11T15:27:01","slug":"la-bestia-se-esta-despertando","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/la-bestia-se-esta-despertando\/","title":{"rendered":"The Beast is awakening\u2026"},"content":{"rendered":"

\"\"By the spring of 2011, some of us had already realised that we were facing the most complex situation we had ever experienced in the markets, and indeed, 2011 was a a year of misfortune<\/em>. However, this was not so much due to the results (the markets fell much more sharply in 2008), but rather to unprecedented upheavals in the financial system. That autumn, we wrote an article entitled \u00abYou can\u2019t see the wood for the trees<\/strong><\/a>\u00ab, and I recommend you read it again to better understand what we are currently facing and what we will be discussing below.<\/p>\n

By the end of 2011, however, we had enjoyed a peaceful honeymoon period that lasted for around five quarters. During this time, we never tired of telling our clients that none of the deadly problems affecting the European periphery \u2013 that is to say, all of us \u2013 had been resolved. And that the risk premium, equities and fixed income appeared to be a haven of peace solely and exclusively because the Beast was asleep. Nothing more. Well then, dear readers, the Beast is waking up, and with it the woes of our economies, the systemic imbalances and the indiscriminate market crashes.<\/p>\n

It is true that until the risk premium skyrockets and becomes the headline on the front pages of the news, the majority of the population will not realise that the Beast is coming back to life. In fact, for most investors who are mesmerised by their banks and politicians, the Beast was definitively defeated a year ago, when the Spanish State (let us remember that it is the guarantor of the credit granted by European mechanisms) bailed out our banks too late, too poorly and insufficiently (note that \u2018the State\u2019 is us, and the money keeping the banks afloat also comes out of our pockets, unfortunately). But no. The bailouts with money owed (More realistic information here<\/a>) and toxic asset holding companies \u2013 namely SAREB or the \u2018Bad Bank\u2019 \u2013 have by no means resolved the problem of insolvency in the banks\u2019 balance sheets, which are still riddled with property \u2018zombie loans\u2019 in freefall and runaway non-payment.<\/p>\n

All these miseries are thrown right in our faces, flaring up with a vengeance the moment a storm cloud looms over the financial ocean. And today we are already seeing US Treasury bond yields falling, despite the fact that USD 85,000 million is still being pumped in every month to keep them at record highs. This quantitative easing has made it possible to finance the US deficit at low rates, whilst simultaneously injecting infinite liquidity into the system in a desperate bid to revive the economy. But of course, when this is done to such an extreme degree, with an underlying economy in intermittent recession, there comes a point when the market can only go in one direction: downwards. And its fall is sending shockwaves through the entire global fixed-income market, as Japanese bonds have joined the a celebration of mistrust,<\/em>\u00a0despite the Abenomics<\/a> in which they find themselves (which, incidentally, is nothing short of uncharted territory, given the sheer scale of the BoJ\u2019s balance sheet).<\/p>\n

The 10-year US Treasury bond is today with a yield of 2.26%<\/a>, when just five weeks ago it stood at 1,66%, that is to say an increase in its profitability of more than 35% in just over a month<\/strong> (Let us remind newcomers that a rise in its yield or return means a fall in its market price.) And let us not forget that this 10-year bond is the most stable and the one most heavily influenced by the Fed. Only time will tell whether the reasons behind the bond sell-off are fears of an imminent spike in inflation, rumours of the start of a tapering of liquidity (Quantitative Easing), or simply a lack of confidence in an asset that has been overused for far too long. The fact is that these falls in bond prices (rising yields) are dragging down the rest of the sound (emerging) fixed-income securities<\/strong><\/a> in a typical pullback by institutional investors. As we have already stated in previous articles, faced with a scenario of widespread over-indebtedness in developed economies, the only guiding principle that will save us from irrecoverable losses in the medium and long term is solvency, even if this is accompanied by volatility that may cause us to suffer temporary losses in the short term. Abandoning this guiding principle will result in permanent losses for those who lose their bearings, as has already happened in cases such as holders of Greek, Portuguese or Cypriot debt or banking products.<\/p>\n

But as they say, when you\u2019re down on your luck, everything goes wrong; at the same time, another significant global phenomenon is taking place, namely the take-off to unprecedented levels<\/strong><\/a> in demand for precious metals for physical delivery. Companies that mint gold and silver coins cannot keep up with the demand to manufacture and supply all the which investors from all over the world are demanding of them. Every day we read news stories like this<\/a><\/strong>, which should send shivers down our spines:<\/p>\n

The\u00a0U.S. Mint<\/a>\u00a0It sold 209,500 ounces of coins last month, compared with 62,000 ounces in March, according to its website. Sales have totalled 52,000 ounces so far this month. Central banks may also help to boost demand for bullion as they expand their reserves. Countries from\u00a0Brazil<\/a>\u00a0to\u00a0Russia<\/a>\u00a0It added 534.6 tonnes last year \u2013 the highest figure since 1964 \u2013 and may purchase between 450 and 550 tonnes this year, according to the World Gold Council in London.\u00a0<\/em><\/p>\n

But the most worrying thing is that the prices of metal futures contracts have begun to decouple from physical gold and silver transactions, as you can read in this other news item<\/strong><\/a>:<\/p>\n

On Wednesday, two of the Mint\u2019s senior managers pointed out that demand for its gold and silver coins is skyrocketing.\u00a0Yet its exchange-traded receipts (ETRs) have traded at a discount to net asset value this year for the first time<\/strong>, even though they are fully convertible into physical gold and silver.<\/em><\/p>\n

In the same vein, some banks and other intermediaries are trying to persuade holders of gold and silver promissory notes to forgo exchanging them for physical metal, in return for a cash bonus! Having reached this incredible point, we may soon see how, whilst the prices of these instruments continue to fall, the price of physical gold and silver surges upwards. Will that be the moment when we come to view precious metals as a safe haven and see their prices skyrocket to infinity and beyond? It would seem logical. That is certainly the view of the world\u2019s leading precious metals guru, Mr Eric Sprott<\/strong><\/a>, with whom we had the pleasure of having a relaxed chat when he welcomed us during our recent visit to the headquarters of Sprott Asset Management<\/a> in Toronto, Canada. In his view, it is undeniable that demand is building for physical gold and silver (rather than paper promises of metal) which cannot be met, and that selling paper at a discount (which implies paying an intrinsic premium for the physical metal) is a very serious matter that highlights the imbalance and the emerging mistrust in the market.<\/p>\n

In short, we find ourselves at a time when the Beast \u2013 the force driving the destabilisation of the system and the widespread insolvency of developed economies \u2013 is awakening from its surprising temporary slumber. And in the face of its wrath, which could destabilise even US Treasuries or Japanese fixed-income securities, We must grit our teeth and carry on, keeping our sights set on North of Solvency<\/a><\/strong>. The rough seas will mean we have to put up with some dizzying ups and downs; unfortunately, that is true. But when the Beast settles down and the storm subsides, we will still be on the right path towards preserving and growing our wealth, without having suffered any losses that we have not already recouped or are on the verge of recouping. On the other hand, those who decide to lurch about and run around like headless chickens amongst fixed-income securities from over-indebted issuers, banking products and Spanish property run a serious risk of suffering irrecoverable losses, and the turmoil will wipe out significant portions of their wealth for good. A word of warning to investors in general: Today, more than ever, the priority must NOT be returns over the coming quarters, but rather the medium- and long-term security of our assets<\/strong>.<\/p>","protected":false},"excerpt":{"rendered":"

Pasada la primavera del 2011, algunos ya nos dimos cuenta de que est\u00e1bamos ante el escenario m\u00e1s complejo que jam\u00e1s hab\u00edamos vivido en los Mercados, y efectivamente, el 2011 fue un annus horribilis. Sin embargo, no tanto en resultados (en 2008 cayeron mucho m\u00e1s los Mercados), sino en alteraciones jam\u00e1s vistas en el sistema financiero. […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38,45,42,39,40,37,48,55],"tags":[],"class_list":["post-3116","post","type-post","status-publish","format-standard","hentry","category-actualidad","category-asesoramiento-deportistas-artistas","category-estrategia","category-crear-mi-propio-family-offices","category-gestion-financiera","category-reflexion","category-asesoramiento-patrimonial-multi-family-office-crear-mi-propio-family-offices","category-necesito-un-family-office"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3116","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=3116"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3116\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=3116"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=3116"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=3116"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}