The Familiar Death Dance—Investors Out to Lunch as Macro Cracks Widen

By Egon von Greyerz

Founder and Chairman

June 23, 2023

Egon von Greyerz Interview with Jan Kneist

In this twenty-minute conversation with Investor Talk’s Jan Kneist, Matterhorn Asset Management founding partner, Egon von Greyerz, soberly assesses the current calm (fantasy) before an inevitable storm driven by rising rates and investor indifference to otherwise ominous cracks in the global economy.

Whether sitting in Switzerland or Sweden, a bemused von Greyerz observes restaurants at full capacity as head-in-the-sand consumers ignore crippling (and increasing) rate hikes from the Euro zone to Canada. Sadly, this all-too-common “death dance” in the face of historically unprecedented debt and deteriorating financial indicators is nothing new to economies racing blindly toward a debt cliff.

Von Greyerz specifically addresses recent US bank regulations and capital requirements adding insult to injury to already fragile lenders sitting on weak legacy loans and simultaneous credit contraction. Adding to this irony is the rise in new home construction permits which fail to ask the question of who will be buying such properties as real estate, like autos, head toward a “negative equity iceberg.” This current café society calm, however, ignores the inevitable consequences of rising rates and undefeated inflation whose longer-term economic pressures, lagging for now, will emerge with crippling force in the months ahead.

Far sighted investors, of course, keep things simple. They see, for example, that interest expense on Uncle Sam’s debt is now at $1T per annum against around $20T in GDP, a ratio which makes the inflationary money printing ahead as easy to foresee (and prepare for) as his Argentine friend who bought gold rather than pesos in 1970.For von Greyerz, developed markets, like the US and EU, will be no exception to such emerging market narratives. In the end, all broke governments become the best of friends to precious metal investors, for the historically-confirmed reason that all broken regimes always debase their currencies.

As von Greyerz calmy concludes: “It’s just that simple.”