88-year-old Byron Wien is one of the most enigmatic luminaries on Wall Street. When asked about his skills, he always refers to a deceased Swiss banker to whom he still pays the greatest respect.
Byron Wien's word still carries enormous weight in the world of investors. This is not only because the soon-to-be 90-year-old American is a living legend, but also because his assessments are always as clear as daylight. This was demonstrated once again last week in a discussion with investors organized by Swiss asset manager Petiole Asset Management, which finews.com was able to attend.
Wien, who despite his advanced age is still vice chairman of the U.S. investment firm Blackstone, is best known for his ten investment surprises, which he has published since 1985, and with which he, like few other augurs, is usually surprisingly correct. In the current year, too, he has partly hit the mark, especially since he anticipated the turnaround in interest rates, saw the further advance of Modern Monetary Theory (MMT) coming, and predicted a new cycle beginning on the financial markets.
Secret Conversations
In connection with his forecasts, it was always interesting in the past that he referred to the «Smartest Man in Europe», a financial expert with whom he apparently had long conversations, but without ever revealing who it was – until he died.
«The Smartest Man in Europe» was none other than Edgar de Picciotto (pictured above), who died in March 2016. De Picciotto, whose roots go back to Sephardic Jews in Lebanon, had immigrated to Switzerland in 1955 and later founded what is now Union Bancaire Privée (UBP), one of the largest and most solid private banks in Switzerland.
Detecting the Trends
Wien and de Picciotto met in the 1980s at a conference of the U.S. bank Morgan Stanley, for which the American was working at the time. This led to a friendship that bore fruit. Apparently, the Swiss banker was able to regularly anticipate the major trends in the financial world: the rise of Japan in the 1980s, the economic boom in Germany and the former Soviet Union after the fall of the Berlin Wall, the advance of hedge funds, later the commodity boom and the weakness of the dollar, the rise of China after 2003 and the golden age of Asia thereafter.
In 2008, de Picciotto is said to have been very nervous, Wien recalls, especially since UBP also lost a lot of money at the time in the wake of the financial crisis in connection with financial fraudster Bernie Madoff. But just a few years later, the Geneva native was betting on the emerging markets (BRIC) and recognized the huge potential in the technology sector.
At a Turning Point Again?
The markets may now be at such a turning point again if Wien's recent comments are to be believed. The American believes that as digitization continues, investing is becoming rather more difficult.
Although the trend toward scaling is increasing, personal judgment is more in demand than ever, he said. Everything is much more complex than it used to be, Wien said. Digitization will also become a very big challenge for regulators in the financial markets, he added. A glimpse of this was provided by the recent speculation by small investors in the shares of Gamestop, the U.S. retailer of computer games.
Vulnerable Tech Stocks
Wien does not currently expect an actual stock market crash; central banks and governments are pumping too much money into the markets for that. Nevertheless, he urges caution with regard to the large U.S. technology companies. These are now proudly valued and therefore vulnerable.
The same applies to Tesla shares, especially since Wien emphasizes that e-cars will not become widely accepted for another 15 years or so. «It won't happen as fast as optimists think,» he said, and accordingly assumes that gasoline-powered vehicles will still be around for quite a while.
A New Cycle Begins
Based on these premises, Wien expects the price of oil, as well as other energy stocks, to continue to rise. Overall, the financial world is now at the beginning of a new cycle, which started at the end of 2020 and is irrevocably taking shape with the prospects of higher interest rates.
Wien therefore now favors cyclical equities, small caps, and high-yield bonds in emerging markets. Many growth stocks will continue to grow in the near future, but at a more leisurely pace, the star investor said.
Almost Bought Bitcoin
Of course, Wien's assessment of Bitcoin was not missing from the conversation. The cryptocurrency has definitely made its way into the investment world, he notes. He has not yet bought a Bitcoin himself, although he has been close to it several times. But the high fluctuations in value have kept him from doing so. He does not see Bitcoin as a currency, but an investment that will remain «very, very volatile.»
