climb quite sharply and we don‟t want to be following what‟s going on in Spain and Italy andsouthern Europe.. I thought it was the right thing to do even though it‟s pretty harsh.
ou‟ve mentioned Spain and Italy; what likelihood would you attach to any
sovereign defaults in the Euro zone or elsewhere over coming years ?
This is down to the populace and whether they‟re going to be prepared to
take the harsh lessons of w
hat they‟re going to have to do.
I mentioned earlier no real wagegrowth throughout most mature economies over the last decade or so
that hasn‟t been true, of course, in southern Europe where they‟ve enjoyed a huge kick
-up in pay to the point where thoseeconomies are uncompetitive. That has to change. Have they got the stomach for reversing those
25% to 30% wage increases they‟ve taken while the Germans have taken virtually none ? Or are
they going to be on the streets and forcing governments to default
on their promises ? It‟s a very
difficult one in terms of what will actually come out at the end of the day; are the Germans
prepared to be the lender of last resort ? I doubt that they are, despite Angela Merkel‟s comments
that she was pro-Euro and they w
ill do all they could. I‟m not sure they would go that far.
Do you have a view on the Euro then ?
I hold no Euro assets in the fund (or negligible amounts). Deliberately. There
are risks for the Euro over the next few years. I‟m
quite happy not to hold Euro assets. That has
had an effect on my asset allocation but I don‟t see much point holding an asset if you don‟t like
the exchange rate of that economy versus Sterling.
Are there any currencies other than Sterling that you particularly like ?
I‟ve been steadily moving toward Asian dollar currencies over the last 18months or so. I hold Asian currency funds and bond funds. That‟s as far as I go –
I haven‟t got any
Asian equities or property to speak of. B
ut I think there‟s a misalignment there that will have tocorrect itself in due course. I also think that Sterling‟s a bit overvalued at the moment andtherefore I‟m quite happy to hold some US dollars. I still think that on any setback the dollar will
benefit as a safety currency though further down the line that may become a little less safe and a
little less attractive. The other currency that I‟ve held long term and since 2006/7 is the Yen,which I continue to hold. I don‟t think the Yen‟s overvalued. I
t was at these levels 15 years agoagainst the dollar, and
since then we‟ve seen inflation in the US over 40% versus negligible in Japan.Despite their debt situation in Japan I still think it‟s a good currency to hold.
Do you have a view on the Japanese stock market ?
have. It hasn‟t proven particularly right in recent times ! I‟ve had a
reasonable weighting, not a huge weighting, towards Japanese equities, for over a year now. I feltthat the DPJ [Democratic Party of Japan] and their focus on domestic policies would be a boon forthe domestic economy. That has turned out to be not so good so far
they lost their first primeminister in four months and the next one nearly went about five months later. But they seem tobe trying
to get domestic policies through; politics is such in Japan that it‟s proving to be quitehard work, now that they‟re not in control of both Houses.
Do you view gold as a currency ? What is your view on gold and silver ?
I certainly have viewed gold as an alternate currency; back in 2001 Iincreased the weighting to gold in the fund to nearly 8% or 9%. Fairly consistently over the last 10years gold has featured between 5% and 10% within Special Situations. More recently, since the
middle of 2009, I‟ve been decreasing that weighting; now it‟s probably less than 5% of the fund. I‟vefelt that there‟s a lot of speculation on gold and the price has run away a little bit, and I‟ve been
concerned about the correlation of the gold
price with other assets. It has moved in the “wrong”
direction on a number of occasions compared to where it should be going as an alternate