Monthly Letter August 2012

It is very easy to be cynical these days. One of the more popular cynicisms is regarding the European politicians and central bankers. The essence is: When there is a problem they come out as firefighters and when the fire has been put out they sit back and wait for the next crisis. In general we believe investors in the last couple of years have found it easier than ever to be cynical about the world in general and Europe in particular.

The month of September is littered with potential pitfalls for regulators and politicians across the world. There are ECB and Fed meetings. The German constitutional court-decision on ESM. A Dutch general election. There is another ECOFIN meeting. As we write this monthly letter most of the decisions have passed with a blessing from the market. The world and the markets are saved again, at least for now. As we have written in previous monthly letters (and as many other market observers have stressed as well): the world needs to solve the debt situation. Whether that should be done by inflation or haircuts remains to be seen, but we believe the pendulum has in swung in the inflation direction again. No doubt it will swing back again in the near future, but for now it is time for equities again.

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