We always like to read Keith Decker and his thoughts. Here is an excerpt from his last piece via IceCap Asset Management.
Similar to volcanic lava flows, financial contagions start slowly at first and then end by destroying many things in its path.
In between the beginning and the ending, is a baffling experience that can only be understood from afar.
Once the eruption begins, people everywhere want to look, see and feel this infrequent experience.
Yet by the end, few actually recognise how the crisis spreads before subtly engulfing everything in its path and ending in a full-on, blow-out contagion.
The financial lava flow has started.
Emerging market bonds and currencies are already experiencing the scorching effect of capital outflows.
Next up will be the European experience.
The culmination of the end of ECB money printing, the end of Angela Merkel’s grip on power, and the end of strict German austerity policies will see the financial lava flow first through Italy, then Spain and then before you realise it – France too.
From there, the contagion spreads far and wide. Few bond markets will be spared and few interest rate sensitive equities will be safe.
All investors, including pension funds, bank owned mutual funds and individual investors have a tremendous opportunity – anticipate and proactively embrace the financial lava, or do nothing and claim ignorance.
We know which action we are taking.
Full presentation here.