Jonathan Ruffer Warns Political Collapse Of Europe Is 'almost Bound To Happen'

In a note to clients seen by Investment Week, Ruffer warned the "world feels more dangerous, and very much more uncertain" than in past years due to a rise in geopolitical tensions.

The chairman said this had led the firm to pay a premium for assets which would provide a protective "shield" when there was a sharp reversal in markets while also maintaining it was important to not "hide in a rabbit hole".

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He also added while the investment portfolios have "returned little in 2017", he is hoping for "better figures" this coming year.

"We always try to balance ‘greed' with fear, and our ‘greedy' equities are concentrated in those areas of the market which have favourable dynamics, without the overvaluation which invariably accompanies the allure of momentum," he said.

"Our investments in fear were…there to protect from a sharp reversal in markets. Our judgement is that they will prove an effective shield…when the ever-cyclical markets swing onto a downward path."

Brexit

One area Ruffer appeared unconcerned was around the UK's exit from the European Union, even if the result was a hard Brexit.

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Although it was important to guard against a reaction in the currency, the chairman said UK asset prices, which would be priced down in the event of a "bad" Brexit, would appear attractive when compared to Europe.

"The shocking thing is that the Brexit deal does not, in the long run, matter very much. Yes, crashing out may cost us five years' growth, but unless you are a citizen of the world, and in charge, that is not a key thing, at least in economic terms."

Ruffer added the EU was "asking for trouble" every time it dealt with issues by attempting to "weld" Europe together into a single voice.

"It worked in the subjugation of Greece, it may or may not work in the outcome with Britain, with Spain, with Germany, with the next but one centre of crisis.

"It looks clear that some things are almost bound to happen," the chairman said. "The first is the political collapse of a united Europe."

Technological disruptors

Although technological companies such as Amazon, Facebook and Uber were "changing the way business is done", Ruffer said they remain dangerous investments due to the possibility of governments fighting back.

"In many investment climates, they would trade at low ratings - the judgement being the speed at which they could grow while conditions remain favourable, counterbalanced by the danger of their business model being de-railed by non-market forces.

"Today's market looks only at the element which is benign for the disruptors - but there will be a fight back.

How much bigger can Facebook, Google and Amazon get?

"We are already seeing one against Uber where the authorities are increasingly imaginative in their resistance to their business model."