The Julia La Roche Show

#128: Felix Zulauf: 'Hell Will Break Loose' — The Next Big Crisis In Late 2020s Will Be A Shocker

Dec 19, 2023

Former hedge fund manager Felix Zulauf predicts a drop in equities due to a recession, warns passive investors of low or negative total returns in the next decade. He comments on the concentration of fund managers and shares his concerns about a shocking crisis in the late 2020s. Zulauf discusses the potential for high inflation rates, fiscal problems, and the role of gold in the future currency system.

34:27

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Felix Zulauf

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Quick takeaways

Passive investors may see low or negative total returns in the next decade, but those who can play mini cycles could find the market environment beneficial.

The next big crisis in the late 2020s will be a shocker, causing 'all hell to break loose,' with potential inflation rates above 10%.

Deep dives

Geopolitical turmoil and changing world order will impact the global economy

The speaker explains that the US-centric world order is over and we are now in a period of rivalry, conflict, and wars. This geopolitical turmoil will intensify over the next decade, leading to increased sanctions, protectionism, and nationalism. These factors will make it more challenging for businesses to operate globally, leading to higher prices and interest rates on a structural basis. The speaker predicts a recession in 2024, followed by a major low in equity markets. However, authorities will inject more money into the financial economy, leading to higher asset prices and potentially inflation rates above 10%. The speaker believes that a crisis in the late 2020s will necessitate fiscal measures such as tax increases and entitlement cuts.

Challenges of Timing Short-term Market Cycles

00:38

Introduction

5min

Nimble Strategies for Market Cycles

12min

The Potential for High Inflation Rates in the Late 2020s

7min

The Fiscal Problems, Potential Solutions, and the Role of Gold in the Future Currency System

6min

Parting Thoughts on the Japanese Yen and Market Opportunities

4min

Former hedge fund manager Felix Zulauf, who is the founder and CEO of Zulauf Consulting, joined The Julia La Roche Show to share his insights on macroeconomics, geopolitics, and the market. Zulauf Consulting is a boutique research and consulting firm that offers investment advisory services to institutional investors and family offices.

In this episode, Zulauf predicted that the market will continue to rise in early 2024 due to the economy appearing stronger than expected. However, he anticipates a drop in equities due to a recession. He described the current market as a "rollercoaster," with ups and downs that could be particularly frustrating for passive investors. He suggested that these investors might see low or even negative total returns in the next decade. According to Zulauf, those who can play mini cycles could find the environment beneficial.

Zulauf also commented on the concentration of fund managers in the Magnificent 7, a level of concentration he has never seen in his 40-year career.

Turning to inflation, Zulauf argued that what we're currently seeing is only a "temporary victory" and that we have "not killed the inflation beast." He shared his thesis for the latter part of the 2020s, predicting a possible 10% inflation rate. He noted that while occasional crises have been managed and kept under control, he worries that the next big crisis in the late 2020s "will be a shocker." As he put it, "all hell will break loose," and the latter half of the decade will be characterized by social, economic, financial, and currency crises.

0:00 Intro and Welcome Felix Zulauf

1:12 Macro view, geopolitical impact, changing world order

2:40 Equity markets likely to go up first, then drop

3:50 Inflation could rise above 10%

5:20 Nimble and flexible

7:29 Playing the markets in the environment

9:40 Fund managers piling into Magnificent 7 stocks, never seen this kind of concentration

14:24 FOMC reaction, Fed outlook, rate cut likely

17:40 Late 2020s, higher inflation, debt trillion

19:38 Inflation cycle similar to late 60s/70s

21:15 Next inflation cycle will create a problem for the bond market

22:15 Yield curve control

23:30 Hell will break loose, next big crisis will be a shocker

24:30 Addressing the fiscal problems

25:37 Gold not just a monetary asset, but a geopolitical asset

30:40 Parting thoughts, Japanese Yen

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The Julia La Roche Show

#128: Felix Zulauf: 'Hell Will Break Loose' — The Next Big Crisis In Late 2020s Will Be A Shocker

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Geopolitical turmoil and changing world order will impact the global economy

Market volatility and the need to be nimble

Implications for the bond market, Fed actions, and the role of gold

Challenges of Timing Short-term Market Cycles

Remember Everything You Learn from Podcasts