Felix Zulauf, a Swiss hedge fund manager, is out with another bearish forecast for stocks, bonds and currencies. Speaking to King World News, Zulauf says the 30-year bull cycle in Treasury bonds has ended, and that gold prices will soon surge again. I think we first see, over the next couple of years, the transfer of government debt from private balance sheets to central bank balance sheets. I do believe the 30 year bull market in government bonds is over. I mentioned in the media (Barron’s) Roundtable that one should be selling half of what he owns, and should sell the other half in September at the latest. I think the whole game is over. Bonds are very overvalued. The real return is negative. Normally bonds yield at least as much as nominal GDP growth. Nominal GDP growth at the present time is about 3% or 4% in the US. I’m not suggesting we go right there tomorrow (in terms of yield), but bonds are very overvalued. ... from now on buying the dips [in the price of gold] is the right strategy because I think we have actually entered the next cyclical bull market within the secular bull run that we are still in. He also has a pretty ugly outlook for stocks: “I think over the next two years or so we will probably see 1,000 in the S&P again (a decline of more than 30%).” In the interview, Zulauf details the price of aggressive monetary accommodation by central banks: The cost is that the fiat currency, paper currency standard, is in the final stage of the ‘super cycle.’ Fiat currency systems always collapse at the end. We are in that stage of the super cycle where things are accelerating. I don’t know how many years we still have, but you can assume that central banks will, as the ECB stated just recently, will do everything necessary to prevent a collapse of the system. That means they will even finance bankrupt governments, they will finance bankrupt banks, they will finance every bankrupt entity that is important to the system.
Felix Zulauf was born 1950, and is the owner and president of Zulauf Asset Management, a Zug, Switzerland-based hedge fund. Felix has worked in the financial markets and asset management for almost 40 years. Mr. Zulauf has been a regular member of the Barron's Roundtable for more than 20 years.