The Crisis is Not yet over
Pfäffikon SZ, Switzerland – As we slowly roll into 2014 the huge losses of central bank gold are slowly becoming visible. Normally this is a signal that the crisis is reversing. De Nederlandsche Bank lost more than six billion euros on the yellow metal. But the Swiss lost as well – losing more than twelve billion euros. Chances of a Swiss bank being able to recover those huge losses in the coming years is small. There is no chance of the Swiss National Bank buying additional gold. “We have 1040 tons, and that’s it” stated SNB Chief, Thomas Jordan.
Falling Interest Rates PIIGS
The crisis is not yet over. But falling interest rates on PIIGS’ bonds suggests that the worst is over. This fall of interest rates has been partly facilitated by a number of European Central Bank (ECB) programs that could be used by local banks. Additionally, foreign parties have responded by aggressively anticipating this trend. Therefore, the picture is distorted.
The problem is France
I noted previously that the problem faced by France may put the whole EU at risk. France’s economy is in a miserable state under the reign of Monsieur le Président Hollande. Even beleaguered Spain seems to have overtaken France when it comes to competitiveness. French citizens are slowly starting to see the damage being caused by Hollande’s socialist policies in France. They are beginning to sulk and complain. Mario Draghi, the President of the ECB, has previously made it clear with his “Whatever it Takes” speech that the future of the Euro should never be doubted. But Draghi cannot fend off political pressure.
Le Pen for President
Hollande’s popularity has never been so low. Marine Le Pen, leader of the far-right Front National and Geert Wilders’ new girlfriend, has a fair chance of becoming the next President of France. Everyone knows that Le Pen wants France to immediately exit the Euro. We should also not forget about the dynamism of Wilders and his positive ratings in the polls. Wilders whispers into the ear of Le Pen to prepare an offensive for the next European Parliament elections. Italian prankster, Beppe Grillo, does it his way in his homeland. They have only one purpose and that is to eliminate the Euro and forever dispel the “monsters from Brussels’.
2008 – Child’s play
Suppose such a scenario unfolds, that would lead the crisis returning to Europe. And 2008 would seem like child’s play. There are several points to consider this year, but this is definitely one to keep in mind. We do not invest in gold for various reasons, as you know. But maybe gold investors will have the last laugh if Europe slowly slips in this direction. Eventually, everyone has to pay into the Stock Market at least once.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. 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 the above shares and has no intention of doing so in the next 72 hours.
