Lord Rothschild Warns ‘Geopolitical Situation Perhaps As Dangerous As Any We Have Faced Since World War II’

Jacob Rothschild, or 4th Baron Rothschild Bt, OM, GBE, FBA, as he’s known across “the pond,” has issued a warning to investors in RIT Capital Partners, an investment trust chaired by the 78-year-old banker. Lord Rothschild wrote in the £2.3 billion trust’s 2014 annual report (Report & Accounts for the year ended 31 December 2014) under “Chairman’s Statement”:

Our policy has been clearly expressed over the years. Simply put, it is to deliver long-term capital growth while preserving shareholders’ capital; the realization of this policy comes at a time of heightened risk, complexity and uncertainty. The economic and geopolitical environment therefore becomes increasingly difficult to predict.

The world economy grew at a disappointing and uneven rate in 2014 after six years of monetary stimulus and extraordinarily low interest rates. Stock market valuations however, are near an all-time high with equities benefiting from quantitative easing. Not surprisingly, the value of paper money has been debased as countries have sought to compete and generate growth by lowering the value of their currencies – the Euro and the Yen depreciated by over 12% against the US Dollar during the course of the year and Sterling by 5.9%. The unintended consequences of monetary experiments on such a scale are impossible to predict.

In addition to this difficult economic background, we are confronted by a geopolitical situation perhaps as dangerous as any we have faced since World War II: chaos and extremism in the Middle East, Russian aggression and expansion, and a weakened Europe threatened by horrendous unemployment, in no small measure caused by a failure to tackle structural reforms in many of the countries which form part of the European Union.

However, in a world of zero or even negative bond yields, equities may well remain the destination of choice for investors. Furthermore, the majority of companies are reporting profits exceeding forecasts together with steady earnings growth. In Europe, the combination of a more competitive Euro, an aggressive programme of quantitative easing and the yields available on equities, may well lead to even higher valuations…

(Editor’s note: Bold added for emphasis)

In 2012, it was reported the elder member of the Rothschild banking family took a $200 million position against the euro.

You can read the entire report on RIT Capital Partners website here (.pdf format).

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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