'Possible Inflation Rise, But It Will Not Be a Catastrophe'
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Michael Burry, the man who predicted subprime mortgage crisis, famous all over the world thanks to Christian Bale’s interpretation in "The Big Short", has no doubts. According to him, we are on the verge of an inflationary period, which would strike a world already on its knees due to the ongoing health emergency. Burry announced on Twitter the arrival of a hyper-inflation wave as it had not been seen since the Weimar Republic, capable of upsetting the world economy. Gabriele Blei, CEO of Azimut Holding, one of the world's largest players in asset management shares his insights.
Blei’s opinion on Michael Burry's prediction
The rise in inflation will be higher than that estimated by the central banks, but the Weimar-style conditions are too different to affirm that the risk is that of hyper-inflation. Nowadays central banks have many tools to intervene and have lately shown to be able to do so in a timely and proactive manner to support and raise the economy and to support the social fabric. All major central bankers have recently stated that they closely monitor the inflationary situation and are prepared to avoid excesses or bubbles, such as in the real estate sector or equity markets.
Consequences on saver’s money
In the unlikely hypothesis that this were to occur, the result would inevitably be a drastic impoverishment (in real terms, of course) of the entire population. The most affected wealth would be that represented by bonds, while real assets such as real estate and precious metals, or representative of real assets, such as shares, could be less impacted.
Increase the shareholding and investments in the real economy (which also reduces the correlation to short-term fluctuations). Listed bonds are the worst asset in the event of inflation, even if moderate. It is essential to have a well-diversified portfolio both by asset class and by geographical exposure. For some time they have been pursuing, also through exposure to products that invest in the real economy, accessible to retail investors, the need to review the asset allocation in order to generate positive returns in the medium to long term.
In February 2021 alone, Azimut Holding stated to record positive organic net inflows of €462 million, bringing net inflows from the beginning of the year to €1.1 billion. The total assets currently administered by the Italian company are stated to be equal to €69.9 billion.