"Investment Outlook"

The world seems to stand still from 11 June to 11 July. The World Cup is here and that means, at least in this part of the world, people pay more attention to football than to financial markets. Perhaps that is good...

As a firm with Swiss roots, we are of course delighted with the results so far. We believe that Switzerland has gone from a penny stock to a real growth story overnight. On the other hand, Spain’s budgetary problems seem to have affected the players. It is probably a pure coincidence that Spain is borrowing EURO 3.5 billion the day after the historic defeat against the Swiss. Rumours that these funds would be used to motivate the players are probably just that: rumours.

Among the blue chips, most nations have disappointed with their performance so far. England continues to have pretty lousy risk management (goal keeper!), while the French players bicker among themselves, just like in domestic politics. Not surprisingly, the best performance so far was “made in Germany”. “Die Mannschaft” played excellent football and the resource-rich Socceroos were unable to get something from the game, except some experience perhaps.

We can’t really see a decoupling of Emerging Markets and Developed Markets. While some Emerging Markets (Brazil, Ivory Coast) have done well, others have bitterly disappointed (South Africa, Cameroon). On the other hand, there were surprising performances from developed nations like the US and Japan, while others were less than convincing (Italy, France, Denmark). The first game of the Greek team was very much a reflection of the state of the nation. Nobody really wanted to work hard. No surprise then, that the hard running and working South Koreans were all over them.

One country remains closed to investors: North Korea. If we could, we would buy a call option on North Korea. There is genuine potential in that team.

Despite the disappointing results, the PIGS (Portugal, Italy, Greece, Spain) will recover, perhaps with the exception of Greece, and they can avoid a default in the group stage.

The World Cup now goes into the second round of group matches and we believe that the excitement is about to start. Let’s hope that we will have less excitement in the financial markets and that the markets will continue to stabilize. We can do with a bit less volatility for a while. At least for the duration of the World Cup!

Enjoy the games!

Best regards,
Urs Brutsch

PS: We will be back with a slightly more serious Investment Outlook soon