Practical analysis for investment professionals
18 October 2012

Felix Zulauf: Eurozone on Track to Be the Shortest Currency Union in History

Posted In: Equity Investments

Crushing any residual optimism amongst delegates after Wolfgang Münchau’s cautionary forecast at the Fifth Annual European Investment Conference, Felix Zulauf, president of Zulauf Asset Management AG, highlighted slowing growth in China as a portent to a global economic crisis that will strike every single region. Zulauf indicated that “excessive” booms always lead to a bust, and China’s will be no exception. He stated that recent Chinese growth was actually far closer to 3% than official reports of nearly triple that level. In his view, market commentators underestimate the problems in China; consequently, public growth forecasts for Australia, Latin America, and other natural resource countries are too high. He also believes that the Chinese authorities could implement “timid stimulus” after the coming leadership change but without much effect; in short, a “credit boom in reverse” seems imminent.

Zulauf argued that the U.S. government will find further fiscal stimulus unaffordable, as debt has risen from $10 trillion to $16 trillion and $25 trillion is in sight within four years at this pace. He argued that fiscal restraint is needed, even if at a short-term cost in growth, and added that “Obama has no plan” and that Republican vice presidential candidate Paul Ryan’s plan is “implausible.” Minor fixes are the likeliest case, resulting in economic stagnation. Zulauf’s only good news was that households appear to have completed deleveraging.

Read more on the European Investment Conference blog →

About the Author(s)
Thomas Collimore, CFA

Thomas Collimore, CFA, is head of industry relations at CFA Institute. Previously, he managed the investor education group. Before joining CFA Institute, Collimore served as managing director of investor relations at CIFG Holding, a group of bond insurance companies based in Paris and Bermuda. He also served as adjunct professor of finance at the College of Insurance, now St. John's University School of Risk Management, Insurance and Actuarial Science. Collimore holds a bachelor’s degree in foreign service, with a concentration in international finance and commerce, from Georgetown University and an MBA, with a finance concentration, from the New York University Stern School of Business.

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