In La Tribune 08/01/2020
Geopolitics is sick of its own endless crises. Sponsored by individual and international interests rather than by a common and local cause, they haunt the Eastern Mediterranean and the Middle East.
Global debt is also sick. Everyone knows that this market will be the object of the next crisis, as volumes of high-yield, i.e. low-rated, credit have exploded since 2008. Sponsored by the accommodating policies of central banks and negative interest rates, the debt has financed everything, including corporate share buybacks.
Summary without nuance, I admit, but one that nonetheless sums up a recent exchange with a remarkably well-managed family office. But as the stock market indices are at their zenith, this conversation addressed a question: will the geopolitics of out of control, of everything is allowed, will it one day eliminate a debt that has become insubstantial? Should we protect ourselves against this by increasing the purchase of safe havens?
The conversation continued into various temptations in investment funds specializing in exotic mineral resources. But I was unblinking my interlocutor’s eyes with a history of unfortunate proposals offered to the market for investments in such metals: rhodium or other PGM, indium, rhenium, tantalum, molybdenum, lithium, etc. Then, by the recent history of investments in rare earths, I denounced them as early as 2015, the AMF issued a warning and there may be legal proceedings. And another episode, that of Cobalt27. Its durability was questioned a year ago before it disappeared 9 months later, in autumn 2019, absorbed by the company Nickel 28, whose future might also appear strange. This brief audit concluded with an examination of investment funds linked to the “rare metals” fake-news. The extreme fragility of their model and their imminent disappearance seemed obvious.
Each time the difficulty of these risky adventures was not to identify and buy weakened metal assets, soon to be in crisis or which will generate “fantastic capital gains”. On the contrary, as the rise in their prices engulfs, shrinks or even closes their markets, the problem is to manage to sell off the position of these metals quickly instead of being forced to wait several months, half a year or more, to find a reliable counterparty and to sell to at a real market price and not a zombie price, without paying outrageous fees to the managers, and so on… All these technical elements are often hidden by the communicators.
Given the number of impostors whose business is these mirages, but who have never worked in an industry and therefore do not know how to operate – follow my lead – it is easy to be caught by these catch-all individuals. The saying of the great popular philosopher of the 20th century, Coluche, has never been more appropriate here: “Just because many are wrong doesn’t mean they are right. »
All things considered, gold will have been chosen. Unlike exotic metals, the yellow metal has a deep, liquid market, with instant and reliable counterparties. Central banks are looking for it, because it is nobody’s debt (read it slowly and think long and hard): if it wasn’t an oxymoron, it could be rated AAA++.
Moreover, while the rising risks of the dual geopolitical-debt context have already benefited it remarkably in 2019, for 2020, the same elements, the value of the dollar and real interest rates, bring its optimistic forecasts to around 2,500 dollars per ounce.