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Currencies  |  October 27, 2012 09:54:09

Nick Beecroft: Prepare for the currency wars, Grexit and protests in the south of Europe

All this within three months of the markets vyzmizíkuje illusory sense of security, which uses money printers evoke the central bank. Investors should therefore already have their portfolios to prepare for defensive concept of the game - fewer stocks, more cash and some gold it is recommended in an interview with the London Investment Web Nick Beecroft from Saxo Bank.

Legibility and predictability of market developments in the markets again deteriorating. Unknown increasing. Therefore, at the beginning briefly how you see the current situation?

Nick Beecroft (NB): I would characterize it as a duel between the effect of economic fundamentals and virtually unlimited liquidity pumped into the system by central banks in many developed countries - the U.S., Britain, Japan and Switzerland, not least of course the ECB. These politicians are buying time to carry out the necessary reforms and changes. Indeed, in the case of the euro zone central bank explicitly calls on politicians, whether use earned time to reconstruct the problematic economies cut deficits and to grasp the gap between north and south Europe. I yet what we experience, consider artificial reality of inadequate condition that makes the market will still dominate about three months comfort.

What comes next?

NB: Then reality will prevail, or a realistic vision of the situation. In this context, recall for example the recent words by the International Monetary Fund, who said he was recently called fiscal multiplier significantly undervalued. The IMF itself assumed that each percentage abridged from government debt is about half percent slower economic growth, a fiscal multiplier of 0.5. Suddenly came with it, it can go up to 1.7.

If while we focus on drastic cuts in southern Europe, it is clear that this region is on the path to total economic collapse that printing money will not turn. So I think that we are now in a kind eye of the hurricane, which enable investors to enjoy the market next two or three months a good mood. In the first quarter of next year, but everything will be different.

Let us, therefore, to the end of this year. As you say, the markets should continue to enjoy doping held by central banks. What this means from the perspective of an investor, what should go?

NB: There is still room for strengthening the so-called risk assets. Shares could go up, while the dollar could be under pressure. It is clear that the Fed is printing money faster than any other central bank. Moreover, it admits, respectively, it boasts. Still, I think it is necessary that the investor was way conservative. The current market is, so to speak, playing dice with death. And one loses. Due to protests by people in the south of Europe, due to the fiscal cliff, or massive cuts associated with it and so on.

It means that now people should buy investment equivalents bunkers and durable supplies of food and drinking water? In short, the assets that will enable them to overcome the chaos?

NB: foresee Armageddon. I do not think we can expect a collapse similar to what we experienced in 2008. For me it will be next year rather lambing is very slow, markets go down slowly. In practice, this means that it is necessary to set up a portfolio on the defensive.

What would it be, and what the other hand prefer to avoid? For example, what you buy now?

NB: It is certainly reasonable to have fewer shares than usual. While regular portfolio consists of some 60 to 70% stocks, 20% government bonds and 10% cash, now has some sense to have, say, 25% in equities, some of those government bonds, no cash and probably have a little more than usual.Perhaps it is also wise to keep some gold in the event that the central bank would have swept the inflationary spiral is spinning faster than waiting. Which I think in two or three years will happen. Therefore, gold is definitely in the portfolio.

What do Nick Beecroft calls Grexit market and the currency bet in case of foreign wars, can be found on the web Investment

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