At present, books are booming that are predicting a crash. The most recent example is a book from Friedrich/Weik, who has shot up to number one on the non-fiction bestseller list with the title “The biggest crash of all time“. Markus Krall also joins this ranks: he expects a crash of the (mainly German) banks in 2020. This is triggered by the ECB’s zero and negative interest rate policy. Krall’s mantra (in reverse of Angela Merkel’s sentence) reads: “If the Euro does not fail, then Europe will fail.
But does a crash so often predicted really happen? With portfolio manager Dr. Andreas Beck, Markus Krall has a partner at eye level. Although Beck shares many aspects of Krall’s analysis. He does not assume that things will escalate as Krall predicts. Beck sees the central banks as more powerful and predictable than ever before. This is because they no longer have any alternative. Nevertheless, the central banks would not have shot their powder yet, which makes it relatively easy for a portfolio manager to act on the markets (whether one likes their monetary policy or not). Beck, however, like Krall, sees the problematic consequences of monetary policy for the society. Young people in particular are disadvantaged because zero interest rates favour wealthy people.
The basic question is: can the central banks go on like this forever by manipulating the financial markets and thus preventing the conditions that are actually necessary? Or will trust and belief in the omnipotence of the central banks be lost at some point? With incalculable consequences, if it results in a gigantic crash.
Beck and Krall analyse the current situation from different perspectives. They also reveal how they are positioning themselves in the markets. Beck has a solid equity exposure and (given the ECB’s backing) also considers Italian bonds to be safe from default. However, he currently sees major problems above all in junk bonds.
Markus Krall, on the other hand, understands diversification above all as bringing investments out of the Eurozone. He therefore prefers short-term bonds in foreign currencies. He assumes that the UK will be the big winner after the Brexit.