Price list sales are raging, in Europe as in Asia. Sales are raining on Wall Street for fear that the arrest of Sabrina Meng, vice president of Huawei, has broken the thread of tariff negotiations between the superpowers. In short, there is little to be happy about. Even for an optimist to the bitter end like Gianni Tamburi, the "soul" of Tip. But he, incorrigible, does not hold back. “I have the feeling – he says – that there is strong pressure on the Fed to slow down the rate hike. In fact, at this rate, I wouldn't be surprised if he didn't raise them at all." Just what, a few hours later, the electronic edition of the Wall Street Journal: “The leaders of the Federal Reserve – reads Rupert Murdoch's US Bible – are considering whether to announce the new rate strategy before or after the December meeting”. In short, guru stuff. Label that doesn't do justice to the long research and analysis work both on financial data and on the field, on the real economy front.
“Unfortunately – he says – time is running out. Given the amount of commitments, I find it hard to repeat the experience of two years ago, when I managed to escape from everyday life and focus on "Prices and values", the book in which I concentrated the juice of my observations on the markets and what could have happened. A courageous, indeed reckless effort that I faced with stubbornness and conviction".
A counter-current analysis came out of it: don't worry, everything will be fine for the next two years. But now?
“Now is the time to update the analysis in the light of the news, which are not few. While awaiting a more complete and systematic examination, some indications can already be drawn. First of all, the good performance of the global economy cannot be overlooked. The data from the Monetary Fund are clear: at the end of 2018, the world was traveling at a cruising speed of 3,8%, with a reassuring margin compared to the risk of a recession".
There is a lot of talk about Chinese braking, though.
“Second observation. In recent weeks I have had the opportunity to meet several entrepreneurs returning from business trips to China. The judgment is unanimous: Beijing is accelerating again. Indeed, the economic recovery is in some ways astonishing, given the quality of the investments and the preparation of the management and workforce. I believe that this could represent a decisive driver for the growth of our businesses. Also because it is simplistic to talk about China. The awakening is sweeping across Asia, from Indonesia to Vietnam, as well as Japan's awakening."
But we're talking about duties here. Or not?
“It is important to provide companies with adequate logistical structures to get around any obstacles. No, I don't think that tariffs can complicate the thrust of our companies that much. After all, I've just been told that the Germans are inventing a furniture fair in China to capitalize on the success of the display of Italian products. Luckily for us, such primates are not rare. As recently as yesterday morning I had the opportunity to examine the budgets of two companies that could enter Tip's circle. I cannot name names, but the accounts are excellent. And I'm certainly no exception."
The conditions of the real economy are therefore good. Or at least allow you to continue to select profitable investments. But many signals point to an imminent negative turnaround of the price lists, also at the behest of the monetary authorities.
“Frankly, I don't believe it. I think the system has no intention of abandoning the strategy adopted after the great crisis. Of course, there may be more or less sensitive course corrections in terms of rates and liquidity to be made available to the markets. But I don't think central bankers' strategy can change that much. Starting from the United States. The enthusiasm with which Donald Trump has intervened to warn the Fed about rates is symptomatic”.
In return, the hotbeds of tension are multiplying, especially in Europe.
“Here, this is an element destined to weigh heavily in the coming months which will be marked by the electoral campaign for the Europeans. In terms of the market, I believe the big US investors will be sellers or, at best, hold positions. To confirm this, just read the reports of the big houses, critical of Italy but also ready to record the slowdown in consumption in France, the uncertainties in Germany and so on. I think there will be good buying opportunities”.
Also in Italy?
“Definitely. Especially in Italy. There is no shortage of good companies. At every level. I am thinking of that extraordinary seedbed of businesses that is Talent Garden, an excellence also on an international level. We have a strong presence in Italian companies but often with a largely prevalent foreign turnover. But we will certainly continue to stay away from banks or businesses related to tariffs or businesses regulated by the public sector. There is one last consideration, however, which I believe must be taken into account when evaluating the current market situation”.
Or?
“Large managers are now conditioned by numbers that they struggle to control. The BlackRock man who held a billion dollars ten years ago now manages at least ten. But he is in turn in a certain sense now a victim of algorithms, increasingly complex and sophisticated as to escape any control. This is the reason that explains the violence of certain movements. How is that possible the arrest of a Huawei executive cause Lvmh, a company with extremely solid fundamentals, to plummet by 7 per cent in the space of a few minutes? Except maybe reverse course the next day with negative effects for the market”.
Difficult to make a robot deviate from the programmed parameters.
“I fear that the better programmed systems, such as Aladdin which in practice guides the choices of BlackRock, have become a problem, even with their efficiency. There needs to be space on the markets' agenda for a more human assessment, to correct the avalanche excesses caused by the accumulation of information that threatens to convey a picture that may be correct, but which, applied mechanically, risks causing errors of assessment" .
Pay attention to the numbers, in short.
“The risk is to concentrate only on a part of the elements, neglecting the whole. The inversion of the yield curve must be followed, but not to the point of neglecting the stability of the global economic system. Critical points emerge from an examination of the economic situation. But the picture remains positive”.
