Lord Jacob Rothchild’s words of caution would be ignored at one’s own peril. The billionaire banker investor has been consistently sounding a cautionary note about risk assets for a number of years now.
RIT Capital Partners 2014 annual financial report contained the first chimes of Lord Jacob Rothchild’s words of caution. “The geopolitical situation is most dangerous since WWII” warned Jacob Rothchild in his chairman’s statement.
“The geopolitical situation is most dangerous since WWII”
LORD JACOB ROTHCHILD
The following year (2015) Lord Jacob Rothchild’s words of caution were made when he commented about the magnitude of monetary policy undertaken by the Fed and it western aligned central banks to sure by financial markets with unprecedented amounts of liquidity. The programme was known as quantitative easing (QE), also known as the Asset Purchase Programme in Europe which entailed the central banks purchasing government bonds. It was then extended to corporate bonds (and most likely stocks too).
Jacob Rothchild described QE as “what is surely the greatest experiment in monetary policy in the history of the world”.
Lord Jacob Rothchild’s words of caution regarding monetary policy are relevant today, bearing in mind that the result of that “greatest experiment” is still unknown.
The Fed’s policy transition from emergency monetary policy to a normalization policy is already causing carnage on emerging markets (EM). The EM rout is currently underway.
“What is surely the greatest experiment in monetary policy in the history of the world”
JACOB ROTHCHILD – describing QE
It could be a taste of what is about to come. All the talk about the Fed’s great unwind of its mammoth portfolio, its balance sheet has just been that. In other words, the Fed has yet to unwind its massive 4.2 trillion dollar balance sheet. So Lord Jacob Rothchild’s words of caution have weight, bearing in mind that QE is now in the rear mirror and Quantitative tightening (QT) lies dead-ahead.
Lord Jacob Rothchild’s words of caution were made again in August 2017 where he warned about asset bubbles. “Share prices have in many cases risen to unprecedented levels at a time when economic growth is by no means assured,” warned Jacob Rothchild.
Perhaps that underscores the fact that QE doesn’t spur on economic activity instead it created fake financial markets.
The generated currency circulates among an elite banking cartel which fuels speculation and unsustainable asset prices (phony wealth) based on the central bank’s fiat money creation. So QE pulls capital into speculative activity and in so doing it deprives the real economy of productive capital.
Real wealth is created on the factory floor and not by central bankers creating fiat currency on a keyboard. It is no coincidence that the world’s largest economies Germany, China are great manufacturing nations. Perhaps the “greatest monetary experiment in the history of finance” has been a failure. Those economies whose central banks have floored QE to the metal are today characterized by sluggish economic growth, widening wealth inequality and record public debt.
But that narrative will not be told inside the mainstream mind-control matrix so critical mass awareness will never be reached.
“a period of monetary accommodation may well be coming to an end. Geopolitical problems remain widespread and are proving increasingly difficult to resolve” – Jacob Rothchild
Lord Jacob Rothchild’s words of caution were made twice last year where he warned that a “period of monetary accommodation may well be coming to an end. Geopolitical problems remain widespread and are proving increasingly difficult to resolve”
But the end of monetary accommodation was widely predicted by most in the market, after all, creating currency indefinitely without bearing any correlation to productivity would lead to a full-blown monetary crisis. The hyperinflation today is appearing in the form of asset bubbles. The historically high stock market, dismal bond yields, and unaffordable housing are examples of a distorted market.
Lord Jacob Rothchild’s words of caution have also been made in his latest half-year Chairman’s statement.
Jacob Rothchild’s latest warning claims that the existing world (the global economic trade models) which was put in place post-WWII is now in jeopardy.
The billionaire banker cites the ongoing US-China trade war which now looks likely to escalate as a threat to the global economic model. Moreover, the ongoing problem in the Eurozone as also pointed to as another threat which puts the economic order at risk.
Lord Jacob Rothchild’s words of caution talk about a lack of “common approach” as globalization unwinds. Trump has made “co-operation today much more difficult”, according to Jacob Rothchild.
“We continue to believe that this is not an appropriate time to add to the risk” – Jacob Rothchild
Nevertheless, despite Lord Jacob Rothchild’s words of caution, his fund has made a new investment in Coupang, South Korea’s leading online consumer business.
RIT Capital Partners has also increased their investment into Acorn, the coffee company which recently acquired Dr. Pepper Snapple.
RIT Capital Partners top sectors include Industrial (US) £ 102.8 million, Consumer staples £ 64.1 million and Information Technology £45.3 million (Dropbox).
Also noted was a massive drop in euro exposure. Euro exposure as % of NAV 31 December 2017 was 12% that fell to just 1% as of 30 June 2018.
Here is more of Lord Jacob Rothchild’s words of caution in his latest statement;
“The problems confronting the Eurozone are of concern – both political and economic – given the potentially destructive levels of debt in a number of countries. The likelihood of trade wars has increased tension and the impact on equities has been marked, for example by early July the Shanghai Composite Index had dropped some 22% from its peak in January.
Problems are likely to continue in emerging markets, compounded by rising interest rates and the US Fed’s monetary policy which has drained global dollar liquidity. We have already seen the impact on the Turkish and Argentinian currencies. We remain concerned about geopolitical problems including Brexit, North Korea, and the Middle East, at a time when populism is spreading globally.”
“We continue to believe that this is not an appropriate time to add to the risk”, wrote Jacob Rothchild.
Dan Loeb targets Sony. Dan Loeb is an activist investor and founder of Third Point, which oversees about $14.5 billion in assets.
Last year the activist investor viewed Campbell soup as a bargain when Third point reported that the soup maker could fetch a takeover value of $52 to $58 per share.
A year later and the activist investor Dan Loeb targets Sony
Dan Loeb's activist hedge fund Third Point is raising an investment vehicle to generate between $500 million and $1 billion so it can continue to buy Sony shares, according to a recent report in Reuters.