Tags: Zulauf | Rally | End | QE3

Swiss Investor Zulauf: Rally Will End in March, No QE3 Soon

Thursday, 16 February 2012 08:05 AM

The rise in risk assets will last until the end of the first quarter, then declines eventually will set in, predicts Swiss investor Felix Zulauf, president of Zulauf Asset Management.

And while he doesn’t see an immediate third round of easing by the U.S. Federal Reserve, known as QE3, monetary authorities here and in Europe are likely to continue to print money to stave off deflation, which will in the end mean higher prices for oil and gold, Zulauf told Australia’s Business Spectator in an interview.

“I think the rally will continue into the end of the first quarter, or maybe a little bit further. And this flood of money means my original scenario could be pushed out further in time,” Zulauf said.

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“I had been expecting that problems would start in the second quarter of this year, and there would be a correction. But now this cyclical rolling-over could be pushed out. From this summer to fall of 2013 seems to me the most vulnerable period for markets.”

Investors should prepare for a long period of share value “compression,” one likely to last until the middle of the decade, Zulauf said.

“This current one started in 2000, and will probably last into the second half of this decade,” he said. “And it’s very similar to what you saw in Japan, with cyclical run ups and cyclical corrections. And these cyclical moves are usually triggered by government programs — both monetary and fiscal.

The United States is unlikely to embark on immediate easing, but Zulauf did not rule out the possibility.

“The U.S. Federal Reserve will try that gimmick when the economic numbers deteriorate, because central banks are in a hopeless situation. Everyone thinks they’re the ones that can save the system. But by printing money, you don’t make the world wealthy, you make a few people wealthy, and you increase the disparity in society,” Zulauf said.

“You push the top 20 percent further up, and you push the other 80 percent further down in prosperity. And eventually that will lead to a social backlash, which could be very bad.”

That eventuality, he predicted, means support for havens from the dollar, such as oil and gold.

“In my view, gold is a currency. Central banks — in the United States and Europe — have no choice. They have to continue printing money to prevent their systems from collapsing, and this will debase their currencies,” Zulauf said.

Billionaire George Soros recently increased his holdings in popular gold fund SDPR Gold Trust, according to a filing. As of Dec. 31, Soros Fund Management had 85,450 shares of the exchange-traded fund, whose ticker is GLD. That’s up from 48,350 shares at the end of the previous quarter.

In the past, Soros has called gold “the ultimate bubble.”

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Thursday, 16 February 2012 08:05 AM
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