Singapore dollar to become the Swiss franc of the 21st century?
An extremely bearish view from a CLSA strategist. But i like his ad slogan for FED.
“The Fed: Printing the American dream since 1913”
“Things in Asia will get better after 12 months,” he said. “The rest of the world will stay bad for 10 to 15 years.”
Napier also argued that the fact that some banks would be eradicated in the next few weeks was a given and beyond debate. “It is amusing when people talk about a double-dip recession,” he said. Napier himself believes the world has been in a recession since the financial crisis started.
In the summer of 2011 the burden of funding the US government shifted to the savers from the printers [of money], Napier said, reinforcing the point with a slide titled “Uncle Sam Needs You”. US Treasuries used to be a safe haven but this year the supply of US government bonds is at a record high. Foreign buyers are still picking up Treasuries, but more slowly. And the onus of funding the deficit is falling on, among others, money market mutual funds, which are dumping corporate bonds and commercial paper in order to do so.
“This represents a structural change, a change in world history,” said Napier. “There is a long, honourable history of running up government debt in the US.” Until 1932 the US government only borrowed money to kill people, he added, but since then it has been not to kill but to keep people alive. I think I should get into advertising, Napier said, noting that an apt slogan for the US Federal Reserve would be: “The Fed: Printing the American dream since 1913”.
“I agree with Churchill who said: ‘America will always do the right thing but only after exhausting all other options’,” Napier said, alluding to the fact that the US is soon going to have to support a generation of baby boomers unless the social contract in the US is renegotiated. Since Napier feels the US is going to be unable to solve the many problems that it is facing, including the social contract, in the near future, he is negative on any investments in US stocks.
He was equally bearish on the prognosis for Europe. Everybody at the conference thinks Europe will deflate, devalue and depreciate, he said, but it is worse than that – Europe will nationalise.
“Get your money into gold and Singapore dollars; keep your powder dry and wait in the next six to 12 months to buy Asian equities,” Napier advised, noting that he expects the Singapore dollar to become the Swiss franc of the 21st century. Napier’s bullishness on the Singapore currency is driven by the fact that the country has a capital account surplus and the government is also unlikely to impose capital controls on inflows and outflows — something he predicts will happen in Europe very soon.
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