Taps Coogan – June 12th, 2021

Last May, when virtually everyone was in agreement that there would not be a ‘V’ recovery in markets, Mark Mobius, Mobius Capital Partners founder and emerging markets pioneer, was one of the very few high profile investors to go on the record as unambiguously bullish on equities in an interview that has proven fairly prescient.

Fast forward a little more than a year and Mr. Mobius is sounding notably less bullish, warning that any pause in the growth of the global money supply will punish markets.

Some excerpts from Mr. Mobius:

“The fact that Bitcoin is down 50%, there is sort of a wealth effect with Bitcoin. A lot of people feel wealthy as result of buying Bitcoin and it going up tremendously and when it goes down, I think a lot of people become pessimistic. The other interesting thing you must remember is that the money supply went up last year, in the US, M2, went up by 31%, but if you look globally probably the money supply has gone up by 50%. Any pullback in the money supply as a result of central banks pulling back will, I think, be very bad for the markets. So we have to watch this very carefully.”

“The other interesting thing is that the US Dollar index is down about 13% since last year and you’ve seen a lot of these other currencies, like the Euro is up 15%, the Korean Won up 14%, RMB up 11%, etc…, etc… Even the South African Rand, and this is unbelievable, is up by 30% since last year. So, some of these currencies have gotten a lot stronger against the US Dollar which is ameliorate a little bit the downturn in markets when they come. But nevertheless, we’re in a very uncertain time, that’s for sure.”

Is this peak ‘reflation?‘