Wednesday, January 9, 2013

The Swiss Felix Zulauf is among the best macro thinkers of our time a good feel for the markets and the general landscape for the future.

In the end of 2012, Zulauf was bearish on China and then in September called a bottom. Hang Sand and Shanghai Composite have rallied ever since. When asked about his current views on China, Zulauf said that China’s new government is trying to maintain a 7-8 per cent growth and it is taking steps so as to ensure this. Moreover, he commented that the country will probably relax monetary policy and increase public spending. He commented said that this will not be like 2008 because China is still suffering from the side effects, saying that its level of growth is actually between 3 and 4 per cent, which means that there is 20-30 per cent upside in Chinese equities.

Felix Zulauf has also shared his views on Europe. Firstly, he said that the prevailing goal of Europe is to keep the euro zone together but the austerity policies could probably be not sustainable. In his view, Mario Monti has lost his support because of the Italian parliaments’ withdrawal of support and that Angela Merkel, who is facing elections, will probably agree on diluting austerity programs. What is more, Zulauf does not see growth in the peripheral countries and he thinks that Germany could be forced to mutualize debt on a small scale. Felix Zulauf also commented that the European Central Bank will be the one to deal with financing rotten governments and rotten institutions.

All in all, Felix Zulauf believes that the euro may see 1.40 in the next quarter before seeing 1.00 in 2014 when yields rise on the peripheral countries’ sovereign debt and markets see much more trouble.

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