Financial expert and bestselling author Marc Friedrich sees the ECB in a dead end and the European monetary union on the brink. On the stock exchange, however, he still expects one last, final party. Until then, he buys bitcoin, diamonds, gold and forest. He advises overweighting commodity stocks.
Mr Friedrich, are you worried about your money?
Marc Friedrich: No.
Friedrich : Because I’ve been dealing with the subject of money and finance for years, because I experienced national bankruptcy in Argentina and because I expected these developments that we are currently experiencing, these upheavals, this turning point and I am prepared accordingly, both mentally as well as monetary.
Friedrich : I invested in values that are limited by nature and mathematics, which increase in value in a fiat money system because they are limited and decentralized. I am broadly diversified. In my portfolio there are forests, diamonds, bitcoin, gold and of course stocks.
Many private investors do not have your experience and are likely to be very concerned about their money given the current challenges. With astronomical energy prices, high inflation and shaky stock and real estate markets, can they just helplessly watch their wealth and wealth dwindle?
Friedrich : If you don’t do anything, of course. As long as it is still possible, I would withdraw money from the banking cycle and buy gold, for example. I would generally go into inflation-protected and limited investments. Precious metals, precious stones, forest. As for real estate, I would wait and see. Then, of course, I would invest in Bitcoin, which at current prices below $20,000 again offers interesting entry opportunities. I also recommend commodity stocks, especially fossil fuels, and stocks in general. However, investors should buy into the correction counter-cyclically and bit by bit.
In the last few months it wouldn’t have been so bad not to do anything. Equities, gold and, above all, Bitcoin have recorded significant price losses.
Friedrich : I would now buy anti-cyclically. When the Tagesschau or the Süddeutsche Zeitung write ‘Bitcoin is dead’, then I know that the time has come to buy. Bitcoin always has these cycles with bull and bear markets. They are very pronounced because Bitcoin is very liquid. Accordingly, in a situation like the current one, Bitcoin is of course sold first before a property is put in the shop window. The statistics also show that anyone who has held Bitcoin for at least four years was always in the black at the end. Even those who are very skeptical should therefore invest 500 euros in Bitcoin. If it goes wrong, you can go on vacation once less. If things go well, you might even be able to buy a house with your bitcoin.
Nevertheless, it is above all the defensive stocks from the areas of telecommunications, energy, pharmaceuticals and insurance that score well on the stock exchange. Is it the one who wins on the stock exchange who invests as conservatively as possible?
Friedrich : Yes, value will initially replace growth. I predicted that in my last book. Classic value stocks will initially do better than stocks from the tech bubble, which needs to be deflated. I would be overweight value right now.
Still? There have already been significant shifts.
Friedrich : In the short term there will definitely be a counter-movement. But over the long term, value tech will beat this decade, largely because the commodity super cycle is here now. Without copper, without tin, without gold or silver there is no blockchain, no e-mobility, no artificial intelligence.
Which raw materials do you see as having the greatest potential?
Friedrich : Actually with everyone. I find tin very exciting. Without tin there are no semiconductors. Copper, one of the most important industrial metals, should also be observed. I see silver as massively undervalued. I believe in uranium because I expect a renaissance in nuclear power. In view of the current energy crisis, coal and gas are attractive anyway.
Apart from commodity stocks, do you see entry opportunities in other sectors?
Friedrich : The whole sector of renewable energies is becoming interesting simply because of the multi-billion dollar subsidies from politicians. In general, if the central banks reverse course again, I would go all in, in tech stocks, biotech, bitcoin. Everything that is fraught with risk but promises growth then goes through the roof again. Then the party really starts.
Is that what you expect?
Friedrich : Not now, but maybe in 2023. At some point the pressure will be too great, the looming recession too severe, and unemployment too high. Then the ECB, like the Fed, will say that we no longer have to fight inflation, we have to fight the downturn. Then there will be rate cuts and quantitative easing again. There will be a final party in the markets. But that’s the last one.
At the moment there is anything but a party atmosphere. Many experts are skeptical, especially with regard to the German and European stock market. Do investors now have to position themselves more internationally?
Friedrich : Yes, absolutely. I am short for Germany and Europe. Not only because of the incompetence of politicians and the EU, but above all because of demographics. In the next ten years, Germany will no longer be able to fill six million jobs. By 2050, the population in Italy or Spain will halve. Then the whole system will collapse. Nobody sees that. By 2050, half of Europe will be de facto bankrupt. That’s the ticking time bomb in the background. The situation looks negative, so I recommend investing defensively. And one should prepare for the worst-case scenario, hoping it doesn’t happen.
Would an ETF on the MSCI World still be the right choice for this?
Friedrich : I wouldn’t buy an ETF on the MSCI World anymore, that’s too broad a range for me. Mainly due to the cluster risk due to the overweight in a few large US tech stocks. It’s actually now about stock picking, fund picking, ETF picking. For example, there is an Oil
This is due to the rapidly increasing energy prices. As a result, the German economy could slip into recession in winter. The Institute for the World Economy now also expects this to be the case. Deutsche Bank boss Christian Sewing claims that it can no longer be averted. Is this pessimism sufficiently priced into the markets?
Frederick : Partially. But this time we don’t have a banking crisis like in 2008, but a global economic crisis caused by disrupted supply chains, corona lockdowns, the energy crisis, or the real estate bubble in China. We will experience a severe global recession. We are already seeing this in the increasing number of insolvencies. First, the companies that already had problems will collapse, but later those that are actually healthy will also collapse. I first had a conversation with a customer who has a bakery in Lower Saxony, who suddenly had to pay 200,000 euros for energy instead of 37,000 euros. This is not practicable. And politicians and central banks are doing everything not to solve the problem but to exacerbate it.
They basically don’t keep a good hair at the ECB …
Friedrich : The ECB is on the one hand an insolvency administrator, on the other hand it is trying to put out the fire that it has been setting for years. With a plus of 0.75 percent, we have now seen the highest rate hike in the history of the ECB. The key interest rate is now 1.25 percent. However, the inflation rate in the euro zone is 9.1 percent. That makes no sense. The ECB would have to raise interest rates much more, but it is faced with the dilemma that the debts in the southern euro countries would explode and they would de facto go bankrupt. Then the ECB would have to buy government bonds again. So the ECB can’t actually do anything. We are therefore experiencing a game for time, a large-scale postponement of insolvency.
What would you do if you were ECB President?
FREDERICK Resign. No, joking aside. I don’t think there is a solution within the current system. We have long passed the point of no return. Many insiders confirm this to me. I have some acquaintances who work at the Bundesbank or the ECB. If you sit together with a glass of beer or wine, people talk tacheles. You say yourself that this game can no longer be won and that you are simply trying to outsmart the mathematics. But that’s not possible. Two plus two is four and not five.
And what would you do now?
Friedrich : I would settle the euro. The euro will never work because the national economies in the euro area are simply too different and behave too ambivalently. We have a fiscal union, a political union and a monetary union that has been in intensive care for years and needs constant resuscitation.
What would you like to say to Christine Lagarde one-on-one?
Friedrich : I’ve been trying to get in touch with the ECB officially and do interviews for years. They’re always canceled for flimsy reasons. I would wish that people would just be honest and put the facts on the table. Wouldn’t it make more sense to end the euro? Because the euro does not unite Europe, which was actually its noble goal, but it divides Europe between rich and poor, between south and north. And that is not good for the European idea. People are starting to realize that the promise isn’t working. Here we should find solutions together. There are always solutions, there is no alternative, that is a huge lie that is being served to us. I would very much like to discuss with Mrs Lagarde how it is possible to bring Europe, the most beautiful continent in the world, back together instead of dividing it.
The interview was conducted by Oliver Götz.
The article “Financial expert warns: “By 2050 half of Europe will be bankrupt”” comes from WirtschaftsKurier.