MACQUARIE: 'Reality is just fake news' - and it's making it impossible to value assets
- The modern world is nigh on impossible to analyse, and it's making investment decisions hugely difficult, according to one analyst.
- "Investors seem to be striving to find order and pattern in a world that has neither," according to Macquarie's Viktor Shvets.
- Valuing assets as "safe" simply cannot be done anymore, he believes.
LONDON - Investors seeking patterns and order in the modern world are likely to be disappointed, as neither exists anymore, according to Viktor Shvets, global strategist at Australian investment bank Macquarie.
Writing to clients this week, Shvets argues that the world is dominated by too much noise and not enough signal, a phenomenon leading to what he calls "a growing chorus of shrill voices" searching for meaning where there simply is none.
"It is only human to search for patterns as without some order, there are no investment strategies. Instead, it becomes a world dominated by noise," Shvets wrote in the note, titled "The end of liberal order."
"Whether it is Trump tariffs, CBs (incessant debate - 'too dovish or too hawkish?') or Facebook and the role of social media, investors embark on a fairly meaningless task of calculating likely damages while trying to rationalize these actions within confines of conventional economic theory (trade is good; lack of it is bad).
"As a result, there is a growing chorus of shrill voices about onset of trade wars and/or need for deep regulatory changes."
An example of this "growing chorus," Shevts says, can be seen in the reactions to recent episodes of widening bond spreads. Previously moving spreads would be treated with caution, but not as a major incident, but now they are "almost immediately interpreted as the onset of major liquidity contraction."
As a consequence, Shvets concludes that "in a modern world of signals, noise & AI driven re-pricing, reality is just 'fake news' (or basically facts you don't like)."
This noise, he says, makes it impossible to assess what can be described as a "safe" asset.
"De-globalization and constraints on capital flows are now not anomalies, but are an integral part of the new investment climate. It implies that it is no longer possible to assess what is 'safe'. Aggressive public sector & technological disruptions blur lines between 'safe', 'value', 'cyclicals' etc," he writes.
How then, are investors supposed to make any money? The answer, in Macquarie's eyes, is to "stay with quality, growth, and thematics," in the equity market.
Shvets is well known for his outlandish predictions and off-the-wall analysis. Recent examples include a note last month in which he said capitalism is dead and finance has become a poison, and the argument that cryptocurrencies and the blockchain technology underpinning them could end up being like the 21st century's version of the invention of the motor car.