The four seasons of the Kondratieff cycle
17. May 2024
- Stability and security. Made in Switzerland.
- Stability and security. Made in Switzerland.
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Unprecedented levels of national debt, rampant monetary expansion, an unimaginable amount of derivatives and enormous financial imbalances make our current financial system extremely unstable.
Politicians and central banks around the world are less and less capable of managing the resulting risks. Debt creation at the expense of the next generation and creeping inflation are the consequences of this inaction. The unprecedented creation of money out of thin air and the politically motivated manipulation of interest rates by central banks are having a direct impact on the value of our money.
Prudent savers and investors should plan ahead. It is high time to invest some of our savings in a crisis-resistant manner before the next financial crisis breaks out. No one can know when this will be the case.
Every financial crisis in the past had a different trigger and developed differently. In most cases, a surprising event shocked investors and led to panic selling on the stock market and a flight to safety. It is only after that initial dust settles that one can start figuring out what the effects of the crisis will be and which asset classes could benefit from it. For example, in March 2020, when the Covid pandemic broke out in Europe, all asset classes experienced significant corrections. It was only after the first shock that precious metals, Bitcoin and shares in companies that could benefit from the pandemic were increasingly in demand.
In the last global financial crisis in 2008, after the collapse of Lehman Brothers, banks no longer trusted each other in the early days. They did not know which financial institution was affected by the Lehman collapse and to what extent, and who would survive the crisis. The interbank market collapsed and the situation only calmed down when the Fed massively opened the monetary floodgates. According to experts, the global financial system came incredibly close to imploding.
Today, banks are more strictly regulated and have to hold more capital. However, as the Covid pandemic has shown with the collapse of various supply chains, the world is now even more globally interconnected than before. This also applies to the financial sector. The global value of all existing derivatives (financial contracts) is equivalent to 200 times the value of all listed companies. How can that be true? Visit the website “All of the World’s Money and Markets” and see for yourself.
Savings accounts or government bonds are often cited as safe investments. However, due to low and/or negative interest rates, these often no longer yield a return and lose purchasing power over the years. What type of investment should I invest my money in? Which investment brings returns and offers protection against sharp falls in value?
Gold has been an accepted medium of exchange for thousands of years and is trusted worldwide as a safe haven in times of crisis. This trust is obviously in our DNA, as gold has been used as a beautiful metal in the form of jewelry and coins as a means of payment for since time immemorial. The yellow metal is also a scarce commodity. In 2020, around 3,400 tons of gold were extracted from the earth worldwide. Experts estimate that if all the gold already mined worldwide were to be smelted together, it would fill a square swimming pool just 21 meters long, wide and deep. As a scarce commodity, gold plays an important role in the long-term preservation of value and can once again serve as a medium of exchange during a crisis of confidence in our current monetary system.
Like gold, Bitcoin, which was conceived during the last financial crisis, is also a scarce commodity. The maximum possible number of Bitcoins is 21 million. As with physical gold, the amount of energy required to mine bitcoins is constantly increasing. This is why experts refer to the mother of all cryptocurrencies as digital gold. In 2020, hundreds of millions of US dollars actually flowed into Bitcoin as a hedge against inflation. This is money that would have gone to gold in earlier times. The great advantage of Bitcoin is its independence from states and central banks. However, unlike the RealUnit, Bitcoin is not backed by real assets. The inherent value of a Bitcoin is highly controversial among experts and is influenced solely by the demand for a limited supply. It is therefore to be expected that the performance of the RealUnit will be more closely aligned with the performance of the real economy than that of Bitcoin.
Investment properties that generate monthly rental income are also suitable and crisis-proof investments for wealthier investors. However, real estate prices in Switzerland are at a very high level. Many pension funds and insurance companies have paid high prices for land and real estate in recent years in order not to burden their cash holdings with negative interest rates. However, owning real estate also entails risks. For one thing, renting out apartments could become more difficult due to the oversupply, but also, if mortgage interest rates rise, the net income could fall quickly. The SNB has been warning for years about a possible bubble forming in the Swiss real estate market. If the bubble bursts and demand falls, real estate prices could plummet by 20-30%.
Investments in companies that have a crisis-resistant business model and have been paying good dividends for years can also be a suitable solution in times of crisis. Investors should ask themselves which companies can sell their products and services well even in a recession. Crisis-resistant sectors include the food industry and the energy sector. It is also important that the companies have a solid and healthy balance sheet and the power to enforce price increases in the event of inflation. In the past, such companies were often given preferential treatment by the state in crises, as politicians attach great importance to maintaining jobs.
*stored outside the banking system in Switzerland
Balance as of 30.09.2024
The RealUnit is backed by performance-oriented and tangible real assets, such as gold and investments in solid companies. At least half of the invested assets are held physically and safely stored outside the banking system in Switzerland. Our goal is to offer increased security, crisis resistance and protection against losses in value due to inflation or during economic and financial crises.
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Sources: Sources: Bloomberg, BFS, SNB und RealUnit Schweiz AG, 30.09.2024 / The RealUnit investment strategy has been implemented in various forms since 2000. 2000-2009: RealUnit backtesting calculations, 2010-2017: Swiss investment fund, 2017-2024: RealUnit Schweiz AG. The average of the largest funds of Swiss banks with a ‹Balanced› strategy serves as a comparison. Past performance is not an indicator of future performance.
In its early phase, RealUnit was an investment fund. We chose today’s structure as an investment company to increase our ability to invest in assets outside the banking system. Most funds must strictly adhere to the predefined ranges of their respective asset classes, making it difficult to respond effectively to severe market disruptions in a crisis. As an investment company, we can implement our investment strategy more flexibly and efficiently in accordance with our investment regulations, aiming to protect our investors’ entrusted capital as effectively as possible during a crisis.
Are you interested in investing in the RealUnit? Here you will find answers to the most frequently asked questions, information about purchases and our contact details. We are happy to help you with any questions you may have.
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RealUnit Schweiz AG is a listed investment company that invests in a broadly diversified range of real assets. We pursue the goal of protecting the assets entrusted to us from crises and loss of purchasing power in the best possible way.
