How Rothschild Sees The Future

Tyler Durden's picture




 

Rothschild has identified four different scenarios that, in their view, are the most likely to occur. The series of scenarios for GDP growth and inflation in the main western economies, Japan and China may guide investor thinking but their somewhat ominous conclusion is worth bearing in mind: "Further monetary 'experiments' are becoming less probable. However, significant imbalances and risks persist. This is the reason why we have left the size (probability) of our depression scenario unchanged."

Notably, equities are not well supported by current valuations, while monetary policy is limited by high debt levels and interest rates that are already close to zero...exposing equities to a potentially sharp correction."

 

Setting the scene

The scenarios presented here are intended to illustrate our economic outlook over the next few years.

What this is

A series of scenarios for GDP growth and inflation in the main western economies, Japan and China.

A simplification. The global economy is complex and multi-dimensional, and can be represented in many different ways. While narrowing in on just growth and inflation involves some simplification, we believe it is still worthwhile – most other economic variables and policy actions can be covered in relation to their impact on growth and inflation.

A guide to our thinking. The scenarios flow from our investment analysis. They are intended to illustrate the thinking that shapes the way we have built our clients’ portfolios. They can also help identify some of the main investment risks and opportunities.

What this isn’t

A series of detailed forecasts. In any exercise like this, there is always a danger of giving a false sense of certainty. We have kept our comments at a fairly high level, providing a sketch of what we see as the most likely outcomes.

Something set in stone. Our analysis evolves over time: the scenarios provide a snapshot of our outlook in 2014.

Something prescriptive. The scenarios are mainly a tool for communication. While they are valuable in our investment decisionmaking, they are not something we use rigidly.

What has changed?

Since we last published this report, the global economy has continued to recover, driven by the US. Although growth remains weak, conditions in the eurozone have also improved. Meanwhile, Japan appears to be making progress with efforts to stimulate its economy and China seems to have avoided a sharp slowdown.

Improving global economic data suggests to us that the world could begin to move away from the current situation of sluggish growth and loose monetary policies. Further monetary “experiments” are becoming less probable. However, significant imbalances and risks persist. This is the reason why we have left the size (probability) of our depression scenario unchanged.

Four main scenarios

We have identified four different scenarios that, in our view, are the most likely to occur.

For each scenario, the position of the bubble shows the combination of growth and inflation that we expect to see in the next one to three years.

The size of the bubble illustrates our view on the likelihood of this scenario occurring – this is subjective, and is intended just to illustrate our thinking.

Growth is expressed in relation to the potential for each country. For example, a growth rate of 4% would be low for China but very high for Europe. Similarly, inflation relates to a country’s individual inflation target.

We have adjusted the size of the bubbles to reflect our view that conditions in the global economy should continue to improve in 2014. We believe the world could begin to move away from our core “muddling through” scenario towards “economic renaissance” and that the “new monetary world” situation has become less likely.

(click image for huge legible version)

Implications for returns from asset classes

The table summarises the expected returns of the major asset classes under each of our four main scenarios.

The circles in the boxes show the expected return over the next three years, relative to the long-term expected returns*. Light green means higher than long-term expected returns*, while light red means lower.

These figures are an illustration of our thinking. They are based on an informed interpretation of our fundamental valuation models.

(click image for huge legible version)

Our conclusions

In most scenarios equities are the most attractive asset class. But valuation support is limited, exposing equities to a potentially sharp correction.

1. Continue to favour equities

We continue to favour equities despite their demanding valuations:

  • Abundant liquidity and repressed interest rates in our “muddling through” and “new monetary world” scenarios continue to support equities.
  • Improved earnings prospects in our economic renaissance” scenario should also boost equity prices despite the prospect of higher interest rates.
  • This pattern applies particularly to the US market. It is the most overvalued region but prices could continue to rise if the “economic renaissance” scenario becomes increasingly likely.

2. Remain cautious on bonds

  • We are avoiding long-maturity nominal bonds because they would be negatively affected by a normalisation of monetary policy in our “economic renaissance” scenario.
  • Within fixed income we continue to like shorter-maturity corporate bonds. This part of the market has two attractive features. First, there is still a decent yield advantage relative to government bonds. Second, the short maturity would offer some protection against rising interest rates, especially in our “economic renaissance” scenario.

3. Maintain exposure to real assets

  • The still sizeable probability of our “new monetary world” scenario lies behind our ongoing exposure to real assets such as gold, real estate and possibly inflation-linked bonds.
  • We are also confident that over an economic cycle equities continue to offer protection against inflation.
  • Additionally, we are focusing on hedge funds that have the flexibility to adjust to an unexpected increase in inflation.

4. Maintain our portfolio hedges

Although we believe the “depression” scenario is the least likely, its impact would be so disruptive that it must be considered within our investment strategy. Notably, equities are not well supported by current valuations, while monetary policy is limited by high debt levels and interest rates that are already close to zero.

Therefore, we include hedging strategies that can limit the potential losses from our portfolios:

  • We have a sizeable allocation to hedge funds that can provide significant protection in a bear market or which are not affected by movements in equity markets and therefore provide true diversification.
  • Additionally, we have direct equity hedges usually in the form of out-of-the-money put options on broad equity indices.
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Fri, 01/31/2014 - 16:59 | 4389267 Josh Randall
Josh Randall's picture

Hopefully through the bars of a jail cell

Fri, 01/31/2014 - 17:08 | 4389295 AlaricBalth
AlaricBalth's picture

So this report favors the economic renaissance scenario. I would imagine the Rothschilds see tmeselves as the New Medici's.

Fri, 01/31/2014 - 17:18 | 4389351 Say What Again
Say What Again's picture

Its good to know that the Rothkids are looking out for the rest of us.

Fri, 01/31/2014 - 17:34 | 4389379 Skateboarder
Skateboarder's picture

Rockefeller version: Scenarios for the Future of Technology and International Development

edit: one of the possible events in the four scenarios they give is

"Islamic Terror Networks Thrive in Latin America (2016)"

I guess anything is possible in the future.

Fri, 01/31/2014 - 18:09 | 4389551 steelhead23
steelhead23's picture

It would appear that the Rothschilds are better at reality than are the Rockefellers.  While I too think there is a danger of violence emanating from south of the border affecting life in the US, the likeliest cause would appear to be competition with the CIA for the US drug market and the dollars being a primary dealer bring than any sillyness about Allah or Jihad.

Fri, 01/31/2014 - 18:35 | 4389655 Citxmech
Citxmech's picture

Rothchilds' strategy in a nutshell:

Step 1: Whatever it takes;

Step 2: Profit!

Repeat forever.

The fact that their assessment lists "renaissance" as a possibility above "depression" shows that this exercise was merely a tongue-in-cheek method of seeing who is paying attention by listening for the ensuing laughter.  

Fri, 01/31/2014 - 18:39 | 4389666 Citxmech
Citxmech's picture

And regarding their possible scenarios - wtf is that bullshit on accepting higher inflation as the cost of growth?  Seriously?  

Sure, we can boost the hell out of GDP just by adding zeros onto the world's currencies. . . 

JFC.

Fri, 01/31/2014 - 19:14 | 4389811 jbvtme
jbvtme's picture

i see nothing about sabotaging the superbowl...

Fri, 01/31/2014 - 19:50 | 4389923 Bad Attitude
Bad Attitude's picture

I think I'll stick with my current investment strategy of food and ammunition.

Forward (over the cliff)!

Sat, 02/01/2014 - 04:36 | 4390859 limit_less
limit_less's picture

Rothchilds' strategy in a nutshell:

Anything could happen and it will probably be good for gold

Fri, 01/31/2014 - 18:36 | 4389656 Four chan
Four chan's picture

prison planet.

Fri, 01/31/2014 - 22:57 | 4390417 GoinFawr
GoinFawr's picture

Red Rover Red Rover

Bob Lazar's comin' over

So honey clear the airstrip and light up that stove

By Jove, I think it's started; OH YEAH

Escape from the Prison Planet!

-Clutch

Fri, 01/31/2014 - 17:36 | 4389428 ArkansasAngie
ArkansasAngie's picture

Their hopes and dreams rest on personal income and cap ex.  So ... That really only leaves the depression as the more likely.

Fri, 01/31/2014 - 18:12 | 4389558 Stoploss
Stoploss's picture

======================FUCK THE ROTHSCHILDS==========================

Fri, 01/31/2014 - 19:47 | 4389913 scrappy
scrappy's picture

Daddy, What the side of that balloon say?

Trial sweetie, trial.

Fri, 01/31/2014 - 17:41 | 4389442 Pseudo Anonym
Pseudo Anonym's picture

not a chance

the Rothschilds see tmeselves as the New Medici's

i am staying the fuck away from this thread, will have a good weekend and see you all boys next week.

Fri, 01/31/2014 - 17:55 | 4389507 LawsofPhysics
LawsofPhysics's picture

Likewise, no fucking way those that are growing richer and taking control of more resources are going to want this to stop. No way liabilities can be funded if interest rates rise.

the system breaks and the world goes to war.

same as it ever was...

Fri, 01/31/2014 - 17:53 | 4389505 Stuck on Zero
Stuck on Zero's picture

Medicis?  Don't you mean Borgias?

 

Fri, 01/31/2014 - 18:34 | 4389591 Levadiakos
Levadiakos's picture

Don't listen to him. He's just another Savonarola

Sat, 02/01/2014 - 05:04 | 4390867 The Heart
The Heart's picture

"Medicis?  Don't you mean Borgias?"

Naw, we got a new handle for these evil things. They now be known as, the rottenchildkillers.

Fri, 01/31/2014 - 17:08 | 4389305 Aaaarghh
Aaaarghh's picture

long drop, sort stop

Fri, 01/31/2014 - 19:09 | 4389796 caShOnlY
caShOnlY's picture

I'll take depression for 10 ounces, Alex

Fri, 01/31/2014 - 20:12 | 4389984 KnightTakesKing
KnightTakesKing's picture

 depression...

According the the Rothschild's, you should be buying government bonds not gold. 

Fri, 01/31/2014 - 20:34 | 4390036 Mr. Fix
Mr. Fix's picture

Maybe they would prefer hanging from a rope, we could give them a nice tall tree or lamppost for a great view.

Fri, 01/31/2014 - 20:41 | 4390059 Market Man
Market Man's picture

What is wrong with you people?????

Sat, 02/01/2014 - 19:07 | 4392091 DonGenaro
DonGenaro's picture

they'll starve in their bunkers

Fri, 01/31/2014 - 17:00 | 4389272 bnbdnb
bnbdnb's picture

I always hated baby blue.

Fri, 01/31/2014 - 18:30 | 4389628 Levadiakos
Fri, 01/31/2014 - 17:02 | 4389278 Al Huxley
Al Huxley's picture

Well, that pretty much covers the gamut of everything that could happen, short of a fucking asteroid hitting the planet or the sun exploding - thanks for the fucking insight Rothschilds, you wouldn't want to let us in on which one you're going to cause, would you?

Fri, 01/31/2014 - 17:13 | 4389320 RSloane
RSloane's picture

I would much rather they view the world through an eyelid swollen from being punched so frequently. They could have summarized their prospectus with BTFATH because it means more money for them and less for the rest of us.

 

Fri, 01/31/2014 - 17:30 | 4389398 Say What Again
Say What Again's picture

Are there any boulders near the Rothkid compund?

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2...

Fri, 01/31/2014 - 18:41 | 4389671 Levadiakos
Levadiakos's picture

The asteroid hitting the planet and the sun exploding scenearios are elucidated in the footnotes. 

Fri, 01/31/2014 - 17:17 | 4389336 AL_SWEARENGEN
AL_SWEARENGEN's picture

Rothchilds withdrawing from the Gold business (outwardly) and removing their seat at the London 'fix' years ago tells us all we need to know about what they really expect.

Fri, 01/31/2014 - 18:33 | 4389641 Mesquite
Mesquite's picture

My conjecture: Their sources sniffed out the coming tsunami of Tungsten..!!

Fri, 01/31/2014 - 18:52 | 4389654 Kirk2NCC1701
Kirk2NCC1701's picture

They pull a 'George Costanza':  Do the opposite!

Actually, most of their gold (40%) is in the basement vault at #1 Rothschild Plaza, Tel Aviv.  25% is in Shanghai, Singapore and Switzerland.  15% is in NY, London, Paris.  Their Rome gold (10% of total) is co-stored with the Vatican treasures, which they safeguard for them (as collateral against lawsuits against the Church).

;-)

Fri, 01/31/2014 - 17:18 | 4389352 SDShack
SDShack's picture

Well, since the Renaisance and Muddling Through are their most likely scenarios, I would choose either of the other 2 as what is going to happen. Best to be contrarian in this case. Depression or New Monetary World Order it is. Probably Depression first, then New Monetary World Order.

Fri, 01/31/2014 - 17:20 | 4389355 Salt
Salt's picture

The 'going to cause' is already in place. Ask yourself one question. Can it end well? There's your answer.

Fri, 01/31/2014 - 17:07 | 4389293 Dr Benway
Dr Benway's picture

Vapidity window-dressed into respectability

Fri, 01/31/2014 - 17:09 | 4389300 percolator
percolator's picture

5. A hero puts a bullet to our head!

Fri, 01/31/2014 - 17:08 | 4389301 lynnybee
lynnybee's picture

aren't these the people who manipulated the price of gold lower & then bought it all for themselves ?   ASSET STRIP THEM.

Fri, 01/31/2014 - 17:22 | 4389361 samsara
samsara's picture

No,  These are the guys that OWN your federal reserve. 

 

The Lost Century

“In November 1910, some powerful US bankers joined by the influential Paul Warburg had a meeting on Jekyll Island that would determine the destiny of the world financial system and the world economy for over 100 years. This infamous meeting led to the creation of the Federal Reserve System in the US on December 23, 1913.

 

The Fed was created by private bankers for the benefit of private bankers and today, 100 years later, they have been more successful than they could ever have imagined in 1913.

Not only have they created a system that efficiently controls the world financial system for their personal benefit but also world politics. They totally understood the advice of Mayer Amschel Rotschild, the founder of the Rothschild banking dynasty, who famously proclaimed:

“Give me control of the nation’s money and I care not who makes its laws.”

http://goldswitzerland.com/the-lost-century/

 

Fri, 01/31/2014 - 18:50 | 4389576 Radical Marijuana
Radical Marijuana's picture

Indeed, samsara, the Rothschilds symbolized the ways the methods of organized crime created governments, and directed what those governments did, namely, operate runaway systems of legalized lies, backed by legalized violence, where the short-term success of the destruction backing up the deceit enabled evil deliberate ignorance to dominate every decision, so that, over and over again, the short-term considerations of the most powerful special interests increasingly drove the longer term consequences to get worse, faster.

BECAUSE "they created a system that efficiently controls the world financial system for their personal benefit but also world politics," they have effectively foreclosed upon and destroyed the future of the human species, since what they did was always based upon triumphantly backing up frauds with force, which never made those frauds become true, but rather drove the destruction of the planet to take place at an exponentially accelerating rate.

The primary long-term result of operating through fundamentally fraudulent financial accounting systems, made and maintained through the methods of organized crime creating and controlling governments, is the collective evil deliberate ignorance of the human species, which is driven to maximize its short-term benefits, regardless of the longer term costs.

Predicting the real future is primarily about waiting and watching as that globalized civilization reaches its tipping points, where the relative magnitudes of the short-term benefits turns towards the relative magnitude of the long-term costs becoming greater. We are near the peak of the maximization of the short-term benefits. Thereafter, we are headed through the prolonged disasters caused by the accumulating longer term consequences manifesting.

The Rothschilds symbolized the most successful group of human beings operating through the methods of organized crime to control other human beings, through debt slavery. While that works well for them, within the human world, in the shorter term, it simultaneously drove more social polarization, and destruction of the natural world, as indicated by the debt slavery numbers developing debt insanity magnitudes.

The most probable future is that the bottom will pop out of the depression bubble, that the chart above indicates is the least probable scenario. For a few centuries, all wars were banksters' wars, so that one could say that wars were the harvest of the banksters. What has happened recently is that progress in science and technologies have made some human beings become trillions of times more powerful and capable, however, those abilities were primarily directed by the banksters, to grow the social pyramid systems, built on lies and violence, maintaining ignorance and fear, so that there could be more readily maintained attitudes of evil deliberate ignorance towards the true longer term consequences caused by doing that. Since there are fundamentally fraudulent financial accounting systems, which have become global electronic frauds, backed by the force of atomic bombs, the most probable future is for exponential growth to madly overshoot, and then collapse into chaos, with the mass murders of the majority of the human population being the most probable longer term consequences of those sequences of short-term expediencies successfully disregarding and discounting the longer term consequences.

The basic problem is the growing contradictions between advances in science and technology making some human beings trillions of times more powerful and capable, to operate through the force backed frauds of the social pyramid systems, which enabled trillions of times worse evil deliberate ignorance towards the longer term consequences due to that having been successful in the shorter term.

The real future is primarily going to be the result of that evil deliberate ignorance towards what human beings have done to themselves and the planet as a whole. Nothing less than massive doses of more radical truth might enable the renaissance bubble to grow onwards, through radical changes of state. However, everything regarding the foundations of the current world social pyramid systems requires that they obstruct and prevent that from happening.

The runaway short-term triumphs of the Rothshilds and their ilk have driven the human species as a whole towards behaving increasingly in suicidal, if not almost omnicidal ways. The successes of controlling civilization through the methods of organized crime become the ways that everything that human beings decide to do is directed by an attitude of evil deliberate ignorance towards the longer term consequences from doing that. The primary theme of the real, foreseeable future is that global civilization will experience going through the tipping points where the longer term costs turn out more and more to be greater and greater than the short-term benefits were!

As long as civilization is dominated and controlled by the ability of banksters and their bullies to use lies and violence, to keep most other people ignorant and afraid, then the future of that civilization is necessarily doomed. Tragically, in each short-term increment, there are no practical, political ways to prevent human beings from collectively acting on the basis of the worst collective stupidity, with the greatest possible evil deliberate ignorance towards the real, longer term consequences of what they are doing. Therefore, the most probable future scenarios are about us "learning" about that in the worst possible ways ...

Sat, 02/01/2014 - 05:45 | 4390892 Disenchanted
Disenchanted's picture

The Rothschilds are the ones pulling the strings of the Vampire Squid puppet...amongst other puppetry.

Sat, 02/01/2014 - 05:45 | 4390893 The Heart
The Heart's picture

You be a seriously rootin tootin, RM.

As always, a great gathering of your thoughts well expressed here on ZH.

Zowie...kapowie!

Big thanks.

Fri, 01/31/2014 - 17:10 | 4389302 LMAOLORI
LMAOLORI's picture

 

 

This is how they really see the future..

 

We Are Sleepwalking Towards A Cashless Society
Fri, 01/31/2014 - 17:11 | 4389308 The Proletariat
The Proletariat's picture

Happy Metal Friday bitchez.

Pretty Maids - Future World; sums this shit up better

http://www.youtube.com/watch?v=SUUJq5mRrSc

\m/ stack on

In the distant
Far away
Trying to figure it out
But I can't explain
Now we see it
Now we don't
We're floating around
In the unknown zone

Watch the starlight
Shooting for the sky
Reaching out to catch
A piece of Paradise
Is it true
Or just imaginations
Visions twist around my mind
And brings me shelter from the night

Where do we go
Where do we go from here
When do we finally disappear

Oh future world
There's nothing left to save
They blew it all away
Future world
Tonight we're riding on
The final escape

Fri, 01/31/2014 - 17:09 | 4389309 The_Ungrateful_Yid
The_Ungrateful_Yid's picture

Rope, Kick, Chair

Fri, 01/31/2014 - 17:11 | 4389311 Oldwood
Oldwood's picture

How many will drown in this "muddling through"? Continued weakness means that many otherwise viable businesses will likely suffer and eventually fail. Like any illness, the longer it drags on, even if it's not imminently terminal, weakens the body making it much more susceptible to other attacks. I've had the sniffles for years now and seem to be developing a much deeper cough...cough...arghh.

Sat, 02/01/2014 - 16:37 | 4391738 Raging Debate
Raging Debate's picture

Muddling through - translation - Stagflation. My forecast several more years of it :(

Fri, 01/31/2014 - 17:11 | 4389314 q99x2
q99x2's picture

When the SHTF the Rothschild's will be arrested and thrown into prisons and their stolen wealth returned to the 7 billion rightful owners.

The end is nigh Rothschild M'Fers.

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