New Normal
Pfäffikon SZ, Switzerland – In the Christmas speech of 2016, Dutch King Willem-Alexander used the term “new normal”. “The extreme seems to be the new normal,” the king said, and, thus, he found the right words to express this concern. At the same time, the king also gave unnoticed a wise investment advice to investors for years to come.
Extreme
The Dutch King referred in particular to the extreme political landscape in which the past is idealized, and the future is in doubt. Meanwhile, small Dutch splinter fractions are mushrooming. The Netherlands has a long and illustrious history in splinter parties. Even though I am a strong opponent of all these splinter parties, the key to the future still lies in politics. New movements must find a balance, and this often occurs in a serious splinter party that serves the Dutch interests as a whole. However, too often this is not the case.
Comparison
In any event; for some time, I believe that the equations of the thirties of last century are piling for longer. No one seems to realize how bad it was at that time. After all, the true stories disappear because there is almost no one alive anymore who can still reproduce this dark period in history. The current generations do not seem to realize what kind of unprecedented wealth and freedom they live, and despite this, dissatisfaction prevails. From different angles, this fact is fascinating food for thought. That the current era is extremely fragile, however, does not gain a hearing.
Institutes
It is too early to judge which road the new U.S. President Trump will walk. The undersigned has been following Trump for several decades and, therefore, Trump’s different political perspectives are no surprise. For example, Trump believes much longer that the NATO does not serve U.S. interests. The big difference with his predecessor is that Trump believes in individuals, not in institutions, which probably has to do with his business background. His alleged close ties with Russian President Vladimir Putin confirm this. Business wise, the Russian roots of Trump go far back. However, a well-functioning democracy is built on institutions and not individuals. By its (direct) democracy, Switzerland is a unique and highly successful country where individuals are subordinate to the Institute.
The investor (and the man in the street) is put on the wrong track by the “new normal”. Freedom and prosperity are not for everybody and certainly not for free. The ongoing euphoria on the stock markets contributes to a false sense of wealth. The stock market is not a good indicator of the economy, politics, a movement or era; it has never been. The “new normal” is moving around the financial markets for some time. For two years, the S&P 500 exhibits a very complex top pattern where investing is invisibly changed in speculation. The tacit desire for greed we have seen before in 1929, 1972, 1987, 1999 and 2007. The King is right; the “new normal” has become extreme.
It remains for me to wish you a good weekend and a prosperous new year.
Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.
