For the last few years, Europe and the wider world have been immersed in a period of financial turmoil unknown since the 1930s, with governments chasing their tails as crisis gives way to crisis. Starting this week, a new series of interviews with those in the know reveals their thoughts and predictions.
Lee Robinson is co-founder of Trafalgar Asset Managers and the founder director of Altana Wealth (London and Monaco), a company which manages assets on behalf of professional clients.
He predicted the banking crisis of 2008, successfully positioning his fund against the Iceland default, sub-prime mortgages and the weakening of the European banks, a strategy which won him the EuroHedge fund of the year award. With one of the best ten-year trading histories in the financial world, and unrivalled experience as a trader and manager, we went along to ask him six questions about where he sees the world going in the immediate and long term future.
You’ve predicted (14 March, Investment Europe) that in the next 15-20 years the US will undergo a financial meltdown that will make the Euro crisis look like ‘a walk in the park’. Briefly, how have you come to that conclusion?
Lee Robinson: The USA has 109 trillion dollars of payments required for medicare and social security plus a 14 trillion current deficit plus another 6 trillion from Freddie Mac and Fannie Mae. The total is $130trillion – close to total global assets. There is no possibility of paying for all of this.
European governments are finding themselves having to balance their books by slashing public services while maintaining incentives for businesses and banks. Have you been more, or less, convinced by the economic actions of any specific politicians or political groups?
LR: Only when finally forced to act by market forces have politicians made the difficult decisions to restructure their country’s labour costs. So far only the Germans have shown any real ability to finance their debts. As for the rest, they are all still running deficits higher than pre-crisis.
How do you see the long-term relationship between the West and the Far East developing in the immediate and long-term future, especially in the technology and energy sectors?
LR: Tough question. Each country is trying to grow and be more competitive. There will be losers and winners. At the moment the Far East is more profitable and in theory should be channelling a proportion of its profits into R&D to develop tech and so on. This is no different to post-WW2 America or Japan. Corruption in countries such as China is hindering that process. In the West we have reduced R&D from ~3% of revenues to 1.8% in two decades – not a good sign.
In what way do hedge funds help individuals, as well as institutions, to protect their assets against the worst depredations of market forces?
LR: Hedge Funds are sophisticated investors who have the ability to use a range of instruments to express their views. Hence they are the only group that can take advantage of falling as well as rising markets. Unfortunately too many of them – due either to size or false impressions – have very little skill in down markets.
You have set up the Altana Charitable Foundation in parallel with your hedge fund activity. What is the purpose of doing so, and what is the foundation’s long-term aim?
LR: Altana Charitable Trust was developed on the back of the charitable bookThe Gathering Storm – more info at www.thegatheringstorm.info. The aim is donate money to a range of 20-plus charities highlighted by the authors, to make the world a slightly better place.
Historically, hedge funds have always been eyed with a mixture of envy and suspicion, but is there anything governments can learn from the way they operate?
LR: Governments need to include people that have deep knowledge of markets to help them plan and develop their economies and create jobs. Clearly a dialogue with Hedge Fund managers, investment bankers, industrialist etc would be a wise step forward. Sadly we keep electing individuals to run our countries that have no business experience at all. Everyone should read ‘Throw them all Out’ by Peter Schweizer.