Understanding Market Prices
Bruegger Invest is a relationship science driven investment manager that uses observation and expertise to predict prices in global markets.
At Bruegger Invest, we conduct scientific research to structure and manage investment strategies that produce better-than-market outcomes over the long term.
Combining money theory with observation and expertise, we developed the general universal macro framework. The general universal macro application is the tool to construct and manage better-than-market-return portfolios. We use the application to monitor market- and portfolio risks.
We execute our strategy globally across markets, instruments and geographies. We risk-diversify our portfolios and build them hierarchically to perform in all market conditions.
Bruegger Universal Macro
Subscriptions in USD, EUR, GBP and CHF currencies available
Shares in Bruegger Universal Macro SICAV, a European onshore fund, will be available for subscriptions from summer 2021.
Bruegger Universal Macro SICAV is underpinned by our universal macro strategy. The Universal Macro strategy has been available in the form of managed accounts since 2020. Universal Macro has delivered strong results, measured both in absolute as well as in risk-adjusted terms.
Bruegger Universal Macro SICAV is underpinned by our belief that prices can be understood and predicted.
We use systems theory and relationship science theory to understand interconnectivities and hierarchies in global systems. Understanding trends and patterns help us to predict prices.
Bruegger Universal Macro SICAV calculates its net asset value at the end of each day. The Fund offers daily dealing. Shares are available in all major currencies.
Iceberg Money Theory
The world is a complex, interrelated and interconnected system of sub-systems, seemingly incomprehensible.
And yet, from observation we can infer that the sub-systems in the system are organised in strict hierarchical order. At the bottom of the hierarchy, the consequences of dropping a crumpled piece of paper in the street may be marginal. Much higher up, a change in money supply will ripple through the entire system.
Understanding money is a prerequisite to understanding prices. We formulated the Iceberg Money Theory to help us explain the formation of prices in modern money hierarchies. Our modern money theory is based on observation and developed from the quantity theory of money and its premise that money supply and price levels are in direct proportion to each other.
Modern money systems in the quality of the global reserve resemble the structure of an iceberg. Using the concept of global liquidity with its offical sector liquidity and private sector liquidity components, the visible tip is the official liquidity system.
The barely visible bottom ice below sea level represents the private liquidity system. Private liqudity supplied by the industry is of different quality.
The Iceberg Money Theory helps us to establish what money is and to see hierarchies within money systems. The Theory permits us to leave out all that is not money.
Making informed investment decisions.
The Bruegger Shadow Money series | Urs Bruegger | 18 August 2021 | Follow @ursbruegger on Twitter
Shadow Money Theory shows us how modern financial systems work. Now we can solve the global growth problem.Read full article
The Covid-19 impact
21 December 2020 | Bruegger Invest Limited
One of the phenomena of Covid-19 is the disappearance of demand for money.
Banks in the US and Europe have seen a surge in deposits as households and businesses have reacted to the economic fallout from the pandemic by putting more money aside.
Swelling deposits have caused a ballooning money supply. In the US alone, M2 money stock, a measurement of official liquidity, has increased by more than 20% since February. The surge in deposits was driven primarily by households with balances below $2,500, according to an article published by the Wall Street Journal.
While deposit liabilities of US commercial banks have risen sharply, loans on the asset side of their balance sheets have not. One explanation is that banks have become more careful about lending to riskier clients. Another is an absence of opportunity for putting their deposits to work.
Alongside the increases in US money supply, global liquidity has improved somewhat as well. We attribute the broadening of the US stock market rally, the rising US ten-year treasury yields, the falling dollar and the partial recovery in emerging market asset prices to the current easing of funding conditions.
Behind this temporary relief however the trend of weakening global economic growth that began in earnest in 2008, now compounded by Covid-19, continues unabated.
The Market view
21 December 2020 | Bruegger Invest Limited
2020 has proven a good year so far for Universal Macro.
Looking ahead, mounting debt and the lack of growth will become major issues in 2021.
An obvious solution to solve the debt problem is to inflate it away. The monetary authorities in Japan, Europe and the US have been unsuccessfully trying to bring inflation back on for years. The choice for the new US treasury secretary, Ms Yellen, is not instilling hope that the riddle of absent inflation is finally being solved.
There is truth in the saying things have to get worse before they get better. The worsening situation will eventually force the world to look for different ways to overcome its massive problems.
2021 can go several ways for equity investors. Our three scenarios for 2021 are continuation, disruption and reversal.
The first scenario of continuation is the most likely. The trend that has seen cyclically adjusted price to earnings ratio (CAPE) lifted from 23 to 33 since 2011 is to go on. The second scenario of disruption is the potentiating effect the fallout in jobs, disposable incomes, tax revenues, among insolvencies, has on a inherently unstable monetary system dependent on the private supply of liquidity, the fuel for stock markets. The third scenario is of an economic recovery that leads to a trend reversal in equity valuations and long term interest rates.
Success in 2021 will depend on getting the balance right. Although equity valuations are likely to continue to move higher into 2021, the precarious underlying economic and monetary conditions leave financial markets vulnerable to liquidity shocks. The last scenario of a reversal is the most unlikely. US long term real yield expectations indicators paint a bleak economic future. The world's economic situation is dire so this possibility cannot be entirely discounted.
A monetary journey
Insight | Bruegger Invest Limited
The Bretton Woods agreement of 1944 established a new global order on the dollar as the reserve. By doing so, America became the world's dominant economic power as only the US could issue dollars.
The eurodollar market, established in the City of London in the 1950s, is the progenitor of today's global liquidity system with its official and private liquidity components. The eurodollar market, the first private liquidity market, was as much an innovation to re-establish the City as the world's foremost financial centre as a response to the need for dollars outside of the US to finance ever faster growing international trade. Eurodollars were deposit liabilities denominated in US dollars and short-term obligations to pay dollars.
Just before 1995, JP Morgan released its RiskMetrics to the market place, a methodology to calculate Value at Risk. RiskMetrics allowed banks to turn millions into billions through nothing more than balance sheet metrics. VaR revolutionised the previously quiet London-based eurodollar market model, turning it into an explosively fast growing private liquidity market. It was the turning point in global money from money proper to credit money.
Private liquidity propelled the US real estate and equity markets. After the dotcom bubble burst in 2000, banks in Europe, Japan and elsewhere became the largest supplier of private liquidity.
Non-US banks directed much of their dollar liquidity to the so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain) countries and emerging market economies. Private liquidity, also referred to as hot money, was the key driver of prices in PIIGS and emerging markets.
Since much was sourced from mortgage-backed collateral, its expansion dependeded on the supply of collateral. This propelled real estate prices in the US and in the UK to new heights. The part of the private liquidity system on unstable collateral (PIIGS, MBS, sub-prime mortgages) suffered a first cardiac arrest in 2008. It recovered somewhat until it was given its final death blow in the European sovereign debt crisis of 2011, which was in effect a PIIGS collateral crisis.
Post 2011, the more stable collateral component of the private liquidity system continues to supply global dollar liqudity. The global liqudity system has become less fragile with the exclusion of inferior collateral. But it also produces less. This is being felt in continuously eroding global growth rates after 2008 and in rising bond (falling yields) and equity prices.
With the event of the global health crisis brought on by the coronavirus, the private liqudity system again exposed its fragility in 2020, when prices fell fast everywhere. The pick up in the supply of private liquidity, in tandem with the opening of economies, has led to remarkable economic improvements in the US so far.
But the restoration of private liqudity has not equallly filtered through to weaker parts of the European economies and to emerging markets. The concern is that the distribution of private liquidity becomes increasingly risk-averse and selective.
Note from the CEO
Urs Bruegger | Bruegger Invest Limited
I am delighted to announce we are launching the Bruegger Universal Macro SICAV fund this summer.
Our vision is to provide investors with table and steady positive return above the developed world equity index, the MSCI World.
The Bruegger Univeral Macro SICAV is founded on observation, prediction and on our investment experience.
I started my professional career at Nomura during Japan’s economic bubble of the 1980s in equities and derivative instruments. I was in the management of US private and public equities during the dotcom boom and in emerging markets debt and equities in the post-millennium boom and bust cycle.
I formulated the Iceberg Money Theory in my quest to understand the instabilities encountered throughout my professional life and to build an investment management tool that produces better-than-market outcomes.
Using our insight, we developed the general universal macro application. It is our application we use to construct and manage strong portfolios that perform in all markets and times.