LVMH CEO sees growing fissures in the global financial system
LVMH luminary and one of Euroland’s biggest kahunas says the world financial system is fraught with risk. Expect wobbles and dislocations anytime now.
Echoing DoubleLine Capital’s genius director Jeff Gundlach this week, Hayman Capital‘s Kyle Bass and JPM’s quant guru Marko Kolanovic (all three icons and inspirations to VIVISXN), bigwig CEO and one of the world’s wealthiest luxury goods peddlers Bernard Arnault has stated that the global business environment is currently “very strange and freaky” due to the fact that interest rates remain at historic lows and firms like his are actually “paid to borrow money” (reflecting negative rates as a consequence of ‘quantitative easing’, i.e. printing money to buy bonds, artificially reducing the cost of capital and flattening the yield curve) — “which is dangerous and risk-laden.”
He went on to opine on a number of global macro topics like Macron‘s election victory in France (he is now a bit more bullish on his home country’s prospects), central bank intervention (he’s totally scared of the “unintended consequences” of today’s monetary policies); and his take on business cycle theory (“booms and busts come in well defined decadal-long cycles. A crash is coming,” he argues). Mssr Arnault, who studied engineering aeons ago at the École Polytechnique (evidently a good school in France — if that means anything?) and that country’s most moneyed up fashion pooh-bah, conjectures that “in the short term, an economic crisis is now inescapable, and our current [global] stock market bubble will soon explode.” Longer term, however, the luxury kingpin said he was “optimistic”, pointing to the innovation and diffusion of novel technologies, which he says should “stimulate the economy and smooth over some of the volatility.”
Anyway, at VIVISXN we fucking love fashion (and finance, to some degree), and we especially adore a few of Mssr Arnault’s token brands like Celine and Christian Dior. But we think any short term wobbles or dramatic dislocations across markets are dips that must be bought (appropriately hedged, of course). In the meantime, we’ll be keeping an eye on LVMH’s rather rich equity valuation — currently trading at a forward P/E of 29.1. Peep the Q&A vid below and brace for a frothy French accent.
VIVISXN – Fashion + Finance