Opinion

Every year there are surprises at the trade fair, although there seem to have been more in 2021. A surprise is something that the vast majority did not expect. That is the reason why surprises can set a stock market in motion. When almost everyone is convinced of something, it is discounted in the stock prices. These were the biggest surprises of 2021.

Democratic Senator Joe Manchin wants to vote against President Joe Biden’s Build Back Better programme. Since the Democrats only have a narrow majority in the Senate, a majority that they are going to lose at the end of this year, the generosity of the American government will be over.

According to the Republican senators and Manchin, it is no longer about saving the economy, but about fighting rising inflation.

While browsing through all the predictions for next year, I noticed that hardly anyone dares to put China on the map. Until I recently saw JP Morgan’s outlook with the appealing headline  “Buy everything in China”. This was followed on Tuesday by Goldman’s statement that all the risks in China have now been factored in.

Since the 1980s, a balanced portfolio has been a great alternative to a full – highly offensive – equity portfolio. A balanced portfolio typically consists of 50 percent stocks and 50 percent bonds, although the children of the bull market have gradually stretched the stock weight to 60 or even 70 percent.

The wine world was taken by surprise in 1976: Steven Spurrier, the British wine merchant, had a jury of experts taste a series of French and American wines blind. To everyone’s surprise, the United States won gold twice in the categories of Chardonnay (California vs. Burgundy) and Cabarnet Sauvignon (California vs. Bordeaux).

Rising house prices, records in the stock markets, extremely expensive bond markets and a new high for bitcoin have caused the total assets of American households to rise by an unprecedented 20 percent in one year. That is more than the total GDP of the United States, expected to reach $21.5 trillion this year.

Money only has value if there is a relationship with the value created in the real economy. So the value of money is not determined by the government, but by the private sector. The role of the financial sector is to allocate savings to those who can use them to achieve a higher return than the interest they have to pay.

The extremely low interest rates frustrate this system. Caveat emptor.

At more than USD 15 trillion, the Chinese bond market is the second largest in the world. China only has to surpass the United States. China is therefore the second-largest economy in the world and the Chinese economy is already almost 20% larger than the United States in purchasing power parity terms. Yet many investors outside China hardly have any positions in Chinese bonds. 

This while, at this time, there is a high added value, both in terms of return and diversification in a broadly diversified bond portfolio.

After almost half a century at the helm of KKR, co-CEOs Henry Kravis and George Roberts are handing over the baton to their successors. Kravis and Roberts are first cousins and, together with Jerome Kohlberg, they founded Kohlberg, Kravis, Roberts & Co (KKR for short) in 1975.

To a large extent, the current inflation level is a consequence of the coronavirus crisis. That is the main argument for labelling it temporary. However, the risk of this temporarily higher inflation is that it becomes lodged between the ears.