Perspectives from the Sarasin Group
The reckless monetary and fiscal policies of the West are undermining private property and responsibility for individuals. Yet both need each other and bring obligations with them in many respects. Burkhard P. Varnholt, Chief Investment Officer of Bank Sarasin & Co. Ltd, explains in the current edition of "Perspectives" that creeping expropriation by the state, however, is having another impact. Ironically, it is leading to a bull market of many years' standing in equities and other risk assets. Though not without reversals, it could make the SMI climb to 15,000 points by the end of the decade.
"The right to property is hereby guaranteed", states Article 26 of the Swiss Federal Constitution. This guarantee of the right to property is directed primarily to the lawmakers themselves. For a society without private property - history has made this unmistakably plain - is doomed to fail: first it fails economically, then it fails socially, and finally it fails politically. And when a society fails politically, then freedom too is endangered. That is why protection of property rights and of individual responsibility is one of the most important actions which a country can take in order to be successful.
The guarantee of the right to property becomes lip service
It is all the more chastening to discover that the guarantee of the right to property is being consistently undermined by the fiscal repression and monetary expansion of the West. But it is a dangerous game when governments, claiming to protect a fragile economic and financial situation, degrade the guarantee of the right to property into mere lip service. The most important reason why at present so many governments are pursuing a property-hostile policy with impunity lies precisely in the fact that this very policy is currently pursued by almost all Western democracies. This gives the impression of there being no alternative. But with its duplicity the West is putting a higher asset at hazard: its internal and external credibility.
Burkhard P. Varnholt, Chief Investment Officer, Bank Sarasin & Co. Ltd
"Property and responsibility are threatened by the reckless monetary and fiscal policies of the West. Ironically this dangerous strategy is also behind the current bull market in equities and other risk assets, which is now four years old. This boom, though not without reversals, will represent for investors until the end of this decade the most amazing and most important consequence of this historical experiment."
On property and responsibility
At bottom, property and responsibility essentially need each other. That property brings obligations, is a general experience in life. But property brings obligations in another, very direct, valuable sense. The ability to transform social savings into capital investment via credit services is the prerequisite for a society with a division of labour. And division of labour is a prerequisite if a society is to promote the comparative advantages of specialised technology, training and industries for its social benefit.
Property also brings us obligations towards the natural and social foundations of our economic activity. In short: to augment our property, we take more out of nature than we put back. It is the responsibility of the property owner to invest and use his assets with due consideration for the natural world. And finally property brings with it an obligation to exploit that world sustainably. That is why companies with a large proportion of family shareholders often enjoy above-average success.
Long-term implications for investors
Since the start of May 2009 most equity markets have risen by 30% to 100% in value. So can we still invest in equities? Yes. For, ironically, a boom of some years' standing in equities and other risk assets is the most important consequence of the Western world's dangerous experiment in monetary and fiscal policies. And we may assume that it will last for at least another five years, because the political costs of its suspension grow disproportionately every year. For this reason the second, central consequence of the foregoing thoughts is that an equity boom over a number of years could very well last to the end of this decade, to 2020. Even price earning ratios of 20x are quite conceivable - since a number of years with zero or negative real returns on government bonds would certainly justify it. When in 1982 the Dow Jones index stood at 1,000 points, nobody would have believed that it was entering on a 17 year boom, which would bring it in 1999 to 12,000 points. If by the end of this decade the Dow Jones can climb to 25,000, then the SMI can certainly rise to 15,000 points. Against this backdrop, Burkhard P. Varnholt, Chief Investment Officer of Bank Sarasin & Co. Ltd, recommends long-term investors to invest in the equities of sustainably managed companies.
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For more information please contact:
Benedikt Gratzl | Media Relations
T: +41 (0)61 277 70 88 | E-mail: benedikt.gratzl@sarasin.ch
Franziska Gumpfer-Keller | Media Relations
T: +41 (0)44 213 97 35 | E-mail: franziska.gumpfer@sarasin.ch
Sameena Ahmad | Corporate Affairs
T: +971 (0)4 363 4300 | e-mail: sameena.ahmad@sarasin-alpen.com
Safra Group
The Safra Group is a highly regarded name in global private banking with a successful long standing history. Safra banks include J. Safra Sarasin Holding and subsidiaries, Banco Safra and Safra National Bank of New York, all built on strong financial foundations. As of December 2012, the Safra Group had aggregate stockholder equity of approximately USD 12.9 billion and total assets under management of USD 200 billion. The Safra banks are in 156 locations worldwide, and have over 7,700 employees.
J. Safra Sarasin Group - Sustainable Swiss Private Banking since 1841
As an international group committed to sustainability and well established through its banks in 30 locations in Europe, Asia, the Middle East and Latin America, J. Safra Sarasin Group is a global symbol of private banking tradition, emphasizing security and well-managed conservative growth for clients. At the end of December 2012 it managed total client assets of approximately CHF 130 billion and employed around 2,140 staff, with stockholder equity of approximate CHF 3.4 billion.
Bank Sarasin-Alpen (ME) Ltd - www.sarasin-alpen.com
The J. Safra Sarasin Group is represented in the Middle East and South Asia with offices in Abu Dhabi, Bahrain, Doha, Dubai, Mumbai, Muscat and New Delhi. Sarasin-Alpen is incorporated as Bank Sarasin-Alpen (ME) Limited in the UAE, as Bank Sarasin-Alpen Qatar, LLC, in Qatar, as Sarasin-Alpen (Bahrain) BSC (c) in Bahrain, as Sarasin-Alpen LLC, in Oman and Sarasin-Alpen India Private Limited in India. These cater to the requirements of private and institutional clients from the Middle East and South Asia.
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© Press Release 2013
