[{"id":12,"tag":"Markets","title":"Could Private Lending Cause a Market Crash?","date":"April 3, 2026","excerpt":"Investors worry that private debt could trigger a 2008-style crisis. We believe the comparison is flawed: private credit today is far smaller, better underwritten, and structurally different from subprime mortgages. Losses would be manageable.","body":"

1. What Is the Issue?<\/strong><\/p>

Investors have begun to worry that private debt could cause another financial crisis similar to 2008.<\/p>

From a historical perspective, private lending was relatively small until 2008, when the financial crisis obliged banks to reduce their balance sheets and risk exposure. At that time, private equity and private debt firms saw an opportunity to gain market share from banks in the lending business, as they were not subject to the same regulatory constraints \u2014 particularly with regard to capital requirements. Private lending is indeed financed by the investors in the fund, not by client deposits that must be protected.<\/p>

Concerns about private debt first emerged in August 2025 when U.S. subprime auto lender Tricolor Holdings defaulted on approximately USD 5 billion in loans. Shortly thereafter, in September 2025, First Brands Group filed for bankruptcy with USD 11 billion in loans. Both defaults involved allegations of fraud, prompting analysts to question the quality of underwriting standards. Then, in the fourth quarter, rapid advances in AI coding capabilities from companies such as Anthropic, OpenAI, and Alphabet's Gemini raised concerns about the viability of software companies and a \"software Armageddon\" (or \"SaaS apocalypse\") \u2014 the fear that the subscription-per-user software model would be disrupted by AI agents.<\/p>

Since software companies have been significant borrowers in private debt markets (possibly representing up to 40% of the total loans), investors began to worry about private debt funds, including those managed by major firms such as Blackstone, BlackRock, and KKR. These concerns then spread to banks, given banks' growing exposure to private debt through lending to private credit funds.<\/p>

The key question for investors is therefore whether there is a risk of a new financial crisis driven by private debt. The underlying concern is that while banks are regulated and subject to supervisory controls, non-bank lenders are largely unregulated and may therefore take on risks that banks cannot.<\/p>

2. Comparing Subprime Mortgages of 2008 to Non-Bank Lending (Private Debt) in 2026<\/strong><\/p>

In 2008, prior to the financial crisis, the total U.S. mortgage market stood at approximately USD 15 trillion (residential and commercial combined). Non-prime mortgages \u2014 including subprime and Alt-A loans \u2014 accounted for approximately USD 2.5 trillion of this total, representing 20% to 25% of the market. Ultimate credit losses on non-prime mortgages amounted to approximately USD 400\u2013500 billion, implying a loss rate of approximately 20%.<\/p>

Losses by the banking sector exceeded this amount due to the widespread use of leveraged derivative instruments. It is well established that prior to the 2008 financial crisis, legal documentation on non-prime lending was wholly inadequate \u2014 income documents were frequently missing, borrowers' financial standing was rarely verified, and property valuations were not independently confirmed. Many banks were \"flipping\" loans \u2014 originating and immediately selling them to other investors, removing any incentive to maintain underwriting discipline. The average loan-to-value ratio on mortgages in the years leading up to 2008 was approximately 82%, and in many cases significantly higher.<\/p>

By comparison, the non-bank private lending sector today totals approximately USD 3 trillion \u2014 substantially smaller than the non-prime mortgage market of 2008. Most private loans are held to maturity within the funds. The average loan-to-value on non-bank lending is approximately 40%. Legal documentation is generally thorough. Since the originators of the loans are the asset managers themselves, due diligence and lending standards are generally of a high quality. Few would argue that firms such as BlackRock, Blackstone, KKR, and their peers are novices in this field.<\/p>

Some of the most widely used indices in the non-bank lending sector \u2014 the Proskauer Private Credit Default Index, the Cliffwater Direct Lending Index, and the Kroll Bond Rating Agency (KBRA) Direct Lending Index \u2014 currently measure default rates at approximately 2.9%.<\/p>

The table below summarizes the key differences between subprime lending in 2008 and non-bank private credit today:<\/p>
<\/th>Subprime Mortgages (2008)<\/th>Non-Bank Private Credit (2026)<\/th><\/tr><\/thead>
Total market size (USD)<\/td>~15 trillion<\/td>~3 trillion<\/td><\/tr>
Non-prime \/ private credit share (USD)<\/td>~2.5 trillion (20\u201325%)<\/td>~3 trillion (entire market)<\/td><\/tr>
Average loan-to-value<\/td>82% (stated); often higher with undisclosed second liens<\/td>~40%<\/td><\/tr>
Default rate<\/td>20\u201325% (peak)<\/td><3% (current)<\/td><\/tr>
Extensive use of derivatives on underlying assets<\/td>Yes<\/td>No<\/td><\/tr>
Strategy of loan originator<\/td>Originate and sell to third parties<\/td>Hold loans to maturity<\/td><\/tr>
Debtor analysis and legal documentation<\/td>Minimal; documents often missing; property values unverified<\/td>Thorough review of debtor and collateral; documentation generally complete<\/td><\/tr><\/tbody><\/table>

While underwriting standards in non-bank lending have deteriorated over the past few years \u2014 debt-to-EBITDA ratios have risen from 3.5x\u20134.0x to 5.0\u20135.5x, payment-in-kind interest has risen from 4.2% to 7.4% of total interest income over the past five years, and interest coverage ratios have fallen from 3.2x to approximately 1.5x currently \u2014 these standards remain meaningfully better than those prevailing in the subprime mortgage market prior to 2008.<\/p>

Furthermore, since the highest default rates are concentrated among issuers with EBITDA below USD 25 million, large funds that tend to focus on larger issuers have been less affected than smaller funds or business development companies (BDCs). For example, non-accrual rates at Ares Capital are approximately 1.8%, at Blackstone below 1.0%, and at Blue Owl below 1.5%.<\/p>

As a consequence, while non-bank private lending may see rising default rates if interest rates increase or the economy weakens, the resulting losses should be manageable and are clearly not of a nature to cause any kind of market crash.<\/p>

To illustrate: assuming non-bank lending experiences a default rate of 10% on a total book of USD 3 trillion, the amount of loans in default would be USD 300 billion. Assuming a 50% recovery rate, losses could amount to USD 150 billion \u2014 equivalent to 5% of the total amount invested in non-bank lending and 0.5% of U.S. GDP. These numbers could not, on their own, cause a market meltdown.<\/p>

The current challenge in non-bank lending is more one of liquidity than of underlying asset quality. Private lending funds are experiencing pressure similar to a \"run on the bank,\" as investors worry about recovering their capital. In the United States this has been exacerbated by the fact that many investors are retail investors who should never have invested in these illiquid funds, as their time horizon and risk aversion do not match the profile of the underlying assets.<\/p>

No financial institution can survive an unconstrained run, as demonstrated by the regional banking crises of 2023 that ultimately contributed to the demise of Credit Suisse.<\/p>

However, in the case of private lending funds, the situation is very different. There can be no \"bank run\" because all of the funds have placed limits on investor redemptions at 5% per quarter to reduce forced selling pressure. The drop in investor confidence has started to show up in other areas. Notably, last week UBS was required to halt redemptions in one of its European real estate funds, suggesting liquidity stress is spreading beyond private corporate lending.<\/p>

As in all periods of market stress, there are opportunities. We believe that for long-term investors, there are compelling opportunities both in non-bank lending funds and in the equities of major asset managers (BlackRock, Blackstone, KKR, Blue Owl, Apollo Group, Ares, etc.).<\/p>","photo":"images\/BB_private_lending.jpg"},{"id":11,"tag":"Markets","title":"Do Geopolitical Risks Matter?","date":"March 4, 2026","excerpt":"Geopolitical risks seldom have a lasting impact on asset prices. Investors who panicked and sold during COVID, Ukraine, or the 2025 tariff shock ended up regretting their decision. We remain positive on equity markets.","body":"

While geopolitical risk is at the forefront of all media, investors need to remember that their focus should remain on the long-term fundamentals of the companies they invest in as well as the valuations of the securities they hold. Geopolitical risks seldom have a lasting impact on asset prices.<\/p>

This was seen during the COVID-19 pandemic of 2020, the start of the war in Ukraine in 2022, the October 7, 2023 attacks on Israel, and with the announcement of the new U.S. trade tariffs in April 2025. All of these events followed the same pattern. Investor confidence dropped, stock prices corrected, economists and analysts lowered their economic growth and corporate profit expectations. Analysts discussed the implications of the \"new paradigm\" the world had entered.<\/p>

Yet, in every single case, financial markets recovered their losses in a matter of weeks. Investors who panicked and sold risky assets ended up regretting their decision. We believe this time will be no different and that soon the situation in Iran will no longer be the main concern for financial markets.<\/p>

By now, investors have also gained a better understanding of Donald Trump. They know that he can make outrageous comments in order to force the other side to come up with a better proposal. The comments he made on the United States ending the war and letting other countries deal with the Strait of Hormuz fit this pattern. Investors also know that Trump has a short attention span and that he is more attached to the \"optics\" of deals than their actual substance. In 2025, investors who ignored the noise from Trump's declarations performed better than those who made decisions based on his latest statements. We expect this to be the same in 2026.<\/p>

We remain positive on equity markets and recommend buying the current correction in financial markets.<\/strong><\/p>","photo":"images\/BB_geopolitical risks.jpg"},{"id":13,"tag":"Economy","title":"The Trade Tariffs Are Illegal: What Happens Next?","date":"February 25, 2026","excerpt":"In a 6-3 ruling, SCOTUS struck down U.S. trade tariffs as unconstitutional. While the administration announced 15% replacement tariffs, these cannot remain beyond 150 days without congressional approval. Overall tariff rates are set to fall below 10%.","body":"

The U.S. Supreme Court (\"SCOTUS\") ruled that the tariffs imposed by the U.S. government were unconstitutional.<\/p>

In its 6-3 ruling to strike down the tariffs, the Court applied two doctrines. The first, \"textualism,\" holds that judges must focus on the precise wording of statutes when interpreting them \u2014 meaning the text of the law, as written by the legislature, is determinative, and judges should not substitute different words to reach a preferred outcome.<\/p>

The second is the \"major questions doctrine,\" under which the executive branch must have clear and unambiguous congressional authorization before taking actions of major economic significance. In the ruling, the Chief Justice emphasized that such authorization cannot be implied.<\/p>

The law relied upon by the U.S. government to impose tariffs \u2014 the International Emergency Economic Powers Act (IEEPA) \u2014 was drafted for situations of war or for cases where the United States wished to take economic action against terrorist states. It was not designed to govern commercial trade disputes. Setting tariffs is the exclusive competency of the U.S. Congress. The application of the major questions doctrine was therefore sufficient for some justices to hold that tariffs imposed under IEEPA were unconstitutional. Other justices applied the textualist doctrine, writing that while IEEPA does permit the President to \"regulate\" transactions, the word \"regulate\" does not confer the power to impose tariffs; had Congress intended to grant that power, it would have said so explicitly.<\/p>

While the Trump administration announced 15% trade tariffs following the SCOTUS decision, the reality is that these tariffs cannot remain in force beyond 150 days without an extension by the U.S. Congress. We view it as highly unlikely that Congress will grant such an extension, as some Republicans oppose the tariffs and the administration does not have the votes required for an extension to pass.<\/p>

While the administration wishes to maintain trade tariffs, it will be limited to the following two legal instruments:<\/p>

Section 232 of the U.S. Trade Expansion Act of 1962:<\/strong> limits imports that pose a threat to national security, insofar as such imports threaten the ability of U.S. companies to produce essential goods for defence and other critical industries.<\/p>

Section 301 of the U.S. Trade Act of 1974:<\/strong> allows the U.S. to impose tariffs in response to unfair trade practices.<\/p>

Section 232 will allow for tariffs in areas such as copper, aluminium, lumber, automobiles and automotive parts, and electronic devices.<\/p>

Section 301 will permit tariffs in the following specific cases:<\/p>

(a) Non-reciprocity in trade tariffs (e.g., foreign countries maintain higher import tariffs on U.S. goods than the U.S. applies to theirs).<\/p>

(b) Foreign companies benefit from government subsidies (e.g., Chinese electric vehicles).<\/p>

(c) Foreign countries impose unfair trade barriers or restrictions (e.g., European restrictions on U.S. meat products due to the use of hormones).<\/p>

Economists estimate that U.S. effective tariff rates will ultimately fall below 10% once the current 15% tariffs expire and only Sections 232 and 301 measures remain in force. This will be positive news for U.S. consumers and companies worldwide and will help reduce inflationary pressure.<\/p>

While uncertainty remains around how affected companies will be compensated for previously paid tariffs, this is a domestic U.S. administrative matter and should not be a concern for investors or financial markets. We expect that the bilateral tariff agreements negotiated between the United States and its trading partners will be quietly wound down, as countries will prefer not to provoke the current American administration publicly.<\/p>","photo":"images\/BB Scotus.jpg"},{"id":10,"tag":"Markets","title":"Kevin Warsh and the Fed","date":"February 6, 2026","excerpt":"If confirmed as Fed Chairman, Kevin Warsh will push for lower inflation, a smaller balance sheet, and a narrower mandate \u2014 developments we view as significantly positive for the U.S. dollar, treasuries, and equity markets.","body":"

If Kevin Warsh is confirmed by the U.S. Senate as Chairman of the Federal Reserve \u2014 which appears highly likely \u2014 he will be focused on several priorities discussed below. Before addressing those, however, we wish to address the question of Fed independence.<\/p>

Some investors continue to worry about the Fed's independence from the executive branch. In our view, the Fed will remain independent. While the Trump administration will have nominated four of the seven members of the Board of Governors (including Warsh), it is not the Board of Governors that sets interest rates \u2014 that is the role of the Federal Open Market Committee (FOMC). The FOMC has twelve voting members: the seven Board members, the President of the Federal Reserve Bank of New York, and four rotating members drawn from the other eleven regional Federal Reserve presidents. Trump appointees will therefore represent only one-third of the FOMC's voting membership.<\/p>

We view the Fed as remaining an independent central bank \u2014 unlike, for example, the Bank of China, whose policies are effectively set by the government.<\/p>

1. Kevin Warsh and Inflation<\/strong><\/p>

Kevin Warsh has stated his desire for both lower short-term interest rates and lower inflation \u2014 objectives that are not always compatible and will present a significant challenge. The Fed's preferred inflation measure, core PCE (Personal Consumption Expenditures), currently stands at 3.1%, significantly above the official target range of 1.0\u20132.0%.<\/p>

According to economists, U.S. trade tariffs have added approximately 0.4\u20130.5% to inflation, and the weaker dollar has contributed a further 0.2\u20130.5%. For Warsh, the SCOTUS ruling on tariffs and a potential strengthening of the dollar could assist in achieving his dual objectives. A stronger currency typically reduces inflation and supports lower interest rates (as seen in Switzerland), while a weaker currency tends to drive inflation and higher rates (as seen in Turkey).<\/p>

We also believe that Warsh is correct in his criticism that the Fed has been too reliant on historical data when making policy decisions, rather than focusing sufficiently on forward-looking indicators. Financial markets always focus on forward-looking information. Investors would therefore likely welcome a departure from Jerome Powell's approach, whose emphasis on lagging data contributed to the Fed being slow to recognize the surge in inflation following the COVID-19 pandemic.<\/p>

2. Kevin Warsh and Quantitative Easing<\/strong><\/p>

Kevin Warsh has been a consistent critic of the Fed's use of its balance sheet for quantitative easing and what he has described as \"subsidizing the Treasury\" through bond purchases. Many investors have long worried that the size of central bank balance sheets has become a source of distortion in asset prices.<\/p>

We believe that Warsh's stated intention to establish clear guidelines on the appropriate size of the Fed's balance sheet, and the conditions under which it should be deployed, is sound and would represent a positive development for investors. These two questions have never been satisfactorily addressed since quantitative easing was introduced in the aftermath of the 2008 financial crisis. A reduction in the Fed's balance sheet would, of course, be strongly positive for the U.S. dollar.<\/p>

3. Kevin Warsh and the Fed's Mission<\/strong><\/p>

Like Treasury Secretary Scott Bessent, Kevin Warsh has criticized what he terms the \"mission creep\" of the Federal Reserve \u2014 the gradual expansion of the Fed's activities well beyond its statutory mandate. The Employment Act of 1946 and the Federal Reserve Reform Act of 1977 clearly define the Fed's mandate as price stability and maximum employment. The Fed was never granted by Congress any powers beyond this mandate. The Fed's involvement in financial sector regulation, ESG policy (environmental, social, governance), and other areas represent activity for which it has no explicit congressional authorization. We believe investors would welcome a Fed with a sharper, narrower focus.<\/p>

We believe Kevin Warsh will push for a smaller Fed balance sheet (i.e., no further quantitative easing) and a much narrower focus on inflation and employment. His preference for forward-looking indicators would bring the Fed and financial markets into closer alignment. We therefore believe that Kevin Warsh will be a significantly positive factor for the U.S. dollar, U.S. Treasury markets, and by extension equity markets.<\/p>

Jerome Powell's term as Fed Chairman ends on May 15, 2026. However, U.S. Senator Thom Tillis is currently blocking the confirmation hearings for Kevin Warsh. According to prediction markets, there is a 45% probability that Warsh will not be confirmed until after May 15. In that scenario, Jerome Powell would continue to serve as Fed Chairman on an interim basis. This also explains why financial markets have reduced their expectations for rate cuts in Q2 2026, as Powell would likely oppose any rate cut in the current environment of elevated inflation risk.<\/p>","photo":"images\/BB Kevin Warsh.jpg"},{"id":9,"tag":"Economy","title":"The U.S. Government Shutdown(s)","date":"October 9, 2025","excerpt":"U.S. government shutdowns are political stints with no long-term consequences on the economy, the dollar, or U.S. treasuries. Investors should treat them as non-events.","body":"

The U.S. Constitution states that the Congress has the sole competence to decide on how the U.S. government spends its money. The American budgetary process works in the following way:<\/p>

1. The government agencies (more than 430) create budget requests that are submitted to the White House Office of Management and Budget (OMB).<\/p>

2. The U.S. President submits a budget proposal to the Congress.<\/p>

3. The U.S. Congress votes on a congressional budget resolution \u2014 a non-binding document that provides a guideline for the appropriation bills (an \"appropriation bill\" is the name given to the law that determines how much money each agency gets).<\/p>

4. All the government agencies are then grouped into 12 groups (e.g. defense, homeland security, financial services and general government, etc.). For each group, an appropriation bill will be prepared. It must be approved by the Congress and then by the U.S. President to become law. It is only at that point that the U.S. government can spend the money according to the bill.<\/p>

If the Congress cannot agree on a regular appropriation bill, it can resort to voting on a \"continuation resolution\" that extends the funding of certain agencies based on the appropriation bill of the previous year. Only minor changes can be made in a continuation resolution. If the Congress cannot agree on a continuation resolution, there is a lapse in funding, commonly called a \"government shutdown\". Shutdowns last until Congress votes on an appropriation bill. During a shutdown, non-essential workers are laid off (sometimes temporarily) while essential workers must continue doing their job even though they receive no salary.<\/p>

There have been fifteen shutdowns in U.S. history, but most lasted less than three days. The shutdown that ended two weeks ago after 45 days was the longest shutdown ever.<\/p>

This past shutdown was ended by a continuation resolution that extends funding until January 30, 2026. Due to the polarized political landscape in the United States, one can expect that a new government shutdown will occur on January 30th as both parties will be trying to leverage budget discussions for the mid-term elections.<\/p>

Investors should consider shutdowns as \"non-events\" \u2014 ephemeral political stints that have no long-term consequences on the economy of the United States, the value of the U.S. dollar, or the value of U.S. treasury bonds. The fact is that in the world, most democratic countries are going through a period of increased political polarization in response to significant external challenges (immigration, wars, external political risks).<\/p>

The S&P 500 index is higher today than on October 1st, the first day of the shutdown. U.S. 10-year treasuries are at the same level as on October 1st, while the dollar index is higher by +1.4%. Talks about the shutdown being negative for the dollar or U.S. treasuries were wrong.<\/p>","photo":"images\/BB Shutdown.jpg"},{"id":8,"tag":"Economy","title":"What will happen to U.S. Trade Tariffs?","date":"October 2, 2025","excerpt":"We believe the SCOTUS will rule Trump's tariffs illegal under the IEEPA. Tariffs will ultimately be limited to those legally permitted under Section 232 and Section 301 \u2014 and overall tariffs will be reduced.","body":"

We do not believe that the trade tariffs decided by the American government will hold against the legal claims that have been filed against them. Indeed, the law used by the U.S. government to implement economic tariffs is the International Emergency Economic Powers Act (IEEPA). This law is applicable in the case of wartime or against terrorist states but not in the case of commercial disputes where setting tariffs is the sole competence of the U.S. Congress.<\/p>

We believe that the U.S. Supreme Court of the United States (\"SCOTUS\") will rule that Trump's tariffs are illegal.<\/p>

Indeed, the majority of the conservative judges in the SCOTUS are \"textualists\" meaning that they focus on the wording of laws when interpreting them. They also favor the so-called \"major questions doctrine\" whereby the government must be granted clear congressional authorization for matters of significant economic impact. Based on these two doctrines, we believe that it is highly likely that the SCOTUS will strike down the tariffs that have already been ruled as illegal at the district court level.<\/p>

Trump wants to keep trade tariffs. Therefore, his government will have to limit itself to the two following tools that are legally possible:<\/p>

1. Section 232 of the U.S. Trade Expansion Act of 1962:<\/strong> this section limits imports in the case of a threat to national security insofar as such imports threaten the ability of companies in the United States to produce essential goods for defense and other critical industries.<\/p>

2. Section 301 of the U.S. Trade Act of 1974:<\/strong> this section allows the U.S. to impose tariffs in response to unfair trade practices.<\/p>

Section 232 of the U.S. Trade Expansion Act of 1962 will allow for tariffs in areas such as copper, aluminum, lumber, cars and car parts, electronic devices, etc.<\/p>

Section 301 of the U.S. Trade Act of 1974 will allow for tariffs in the following cases:<\/p>

(a) non-reciprocity in trade tariffs between the United States and the foreign country (e.g. foreign countries have higher import tariffs than those applied in the United States on imports);<\/p>

(b) foreign companies benefit from subsidies in their country (e.g. Chinese electric vehicles);<\/p>

(c) foreign countries put in place unfair trade barriers or trade restrictions (e.g. European restrictions on U.S. meat due to the use of hormones).<\/p>

Sections 232 and 301 will therefore allow the U.S. to maintain tariffs, but only in certain clear cases.<\/p>

\"Blanket\" country tariffs will be replaced by the following:<\/p>

1) Section 232 tariffs on aluminum, copper, steel, electronic devices and semiconductors, auto parts, aeronautical parts, machinery parts and equipment.<\/p>

2) Section 301 tariffs on the EU (various trade barriers, including on meat imports and non-reciprocal tariffs), India (trade barriers and non-reciprocal tariffs), and China (technology companies, automotive companies, etc.).<\/p>

For investors, the bottom line is that overall tariffs will be reduced, and this will be positive for companies and the American economy.<\/p>","photo":"images\/BB Tariffs.jpg"},{"id":7,"tag":"Economy","title":"Is the U.S. trade deficit unsustainable?","date":"September 8, 2025","excerpt":"The U.S. trade deficit is the consequence of the U.S. being the largest and wealthiest economy in the world. As long as the American economy remains strong and competitive, it should not be a concern for investors.","body":"

The U.S. trade deficit is the consequence of the U.S. being the largest and wealthiest economy in the world, as well as being one of the most rational economies \u2014 in the sense that most economic decisions are made by rational corporations, unlike many other economies where central planning and government intervention ultimately lead to economic imbalances and risks.<\/p>

As long as the U.S. remains an attractive market for equity investors, bond investors and real estate investors, the U.S. will have no problems offsetting the trade balance deficit with capital inflows. Furthermore, while the U.S. has a large trade deficit in goods (~USD 1.4 trillion per year) that is growing at about 14% p.a., it has a rising trade surplus in services (~USD 300bn p.a.) that is growing at about 17% p.a., led by technology.<\/p>

As long as the American economy remains strong and competitive, capital inflows to the United States will continue. The U.S. trade deficit should therefore not be a concern for investors, and certainly not a reason to avoid U.S. bonds or U.S. equities.<\/p>","photo":"images\/BB Tradedeficits.jpg"},{"id":6,"tag":"Markets","title":"Understanding Donald Trump","date":"August 6, 2025","excerpt":"Trump's announcements can be explained by four factors: a craving for attention, a bombastic negotiation style, a preference for appearances over substance, and a short attention span.","body":"

Trump's announcements can be explained by four factors:<\/p>

1) Trump craves attention from individuals and the media.<\/p>

2) Trump's negotiation style is to make bombastic announcements \u2014 even if they are not based on facts or are nonsensical \u2014 in order to force the other side to compromise.<\/p>

3) Trump attaches greater importance to the appearance of announcements than their substance. The trade agreements with Japan and the EU included wording about an increase in investments in the United States. Yet such decisions belong mainly to the private sector, over which the government has little influence.<\/p>

4) Trump is said to have a short attention span and to lose concentration quite quickly. When he is tired or annoyed, he will tend to throw a tantrum and make some of his most outrageous statements.<\/p>

After Trump makes such statements, members of his administration scramble to do damage control \u2014 this is often undertaken by U.S. Treasury Secretary Scott Bessent.<\/p>

This predictable pattern of behaviour is the reason why investors who have ignored the noise from Trump's declarations have fared better than those who made decisions based on his latest comments or statements.<\/p>

Indeed, the only entity which holds all the cards and can force any government into submission is the financial markets. They can push long-term interest rates higher or drive currencies lower until the economic pain threshold is hit \u2014 at which point no legitimate government can resist.<\/p>","photo":"images\/BB Donald Trump.jpg"},{"id":1,"tag":"Markets","title":"There Are No Alternatives to the US Dollar","date":"April 2, 2025","excerpt":"One can go through all the currencies in the world. But at the end, the dollar is the only currency that offers investors safe and liquid sovereign bonds.","body":"

One can go through all the currencies in the world. But at the end, the dollar is the only currency that offers investors safe and liquid sovereign bonds as well as liquid bond, equity, and real estate markets.<\/p>

As long as the American economy is strong and American companies thrive, there is no currency that can seriously challenge the U.S. dollar. The reality is that a strong currency leads to lower interest rates. A weak currency leads to higher rates. The American economy works with credit so it must have low interest rates to properly function.<\/p>

There cannot be a de-dollarization since there is no substitute for the U.S. consumer. Neither the Chinese nor the European consumers are close to overtaking the American ones. On the contrary, the demographic trends in these regions point to weaker future consumer spending.<\/p>","photo":"images\/BB Dollar Bill.jpg"},{"id":2,"tag":"Markets","title":"UBS will not leave Switzerland. Here is why.","date":"May 4, 2025","excerpt":"After the demise of Credit Suisse, the Swiss parliament and authorities have been discussing tougher capital rules for the four Swiss systemic banks. The new rules seem mostly directed against UBS.","body":"

After the demise of Credit Suisse, the Swiss parliament and authorities have been discussing tougher capital rules for the four Swiss systemic banks. The new rules seem mostly directed against UBS.<\/p>

UBS has been vocal in saying that it is unhappy with the new capital regulations which it may be subject to. We agree with UBS that the issue that must be addressed is liquidity and not capital ratios. Indeed, Credit Suisse became nonviable, and had to be saved, due to liquidity problems (a run on the bank) and not to insufficient capital ratios.<\/p>

That being said, the regulators are focusing on stricter capital requirements and there has been speculation about UBS leaving Switzerland. This appears highly unlikely when one tries to answer the following question: in what jurisdiction could UBS go and develop its businesses? Let's discuss the alternatives.<\/p>

United States:<\/strong> this would subject UBS to fewer regulations but to higher taxes than in Switzerland. It would also be detrimental, due to geopolitical issues, to the business in Asia and Europe. Many international private banking clients may not like the idea of being in a US bank, subject to all the potential issues of the US, including potential taxes in the case of inheritance.<\/p>

United Kingdom:<\/strong> post Brexit, the United Kingdom has been losing its status as a financial capital. The new tax regulations are leading individuals to leave the country and the corporate taxes for UBS would be higher than those in Switzerland.<\/p>

France (Paris), Germany (Frankfurt), Italy (Milan):<\/strong> all these European capitals have seen an increase in activity after Brexit. However, all these countries have high taxes for companies. The sovereign risk of these countries could also become an issue for clients.<\/p>

Hong Kong:<\/strong> UBS could not relocate its headquarters to Hong Kong since this would lead it to be a Chinese bank with the obvious consequences.<\/p>

Singapore:<\/strong> as Singapore has become increasingly closer to China, it is not possible to think that UBS would relocate here.<\/p>

In conclusion, for UBS, there is simply no better place for business than Switzerland. Not only are the taxes lower, but there are far fewer geopolitical issues that exist by being in Switzerland.<\/p>

Lastly, the financial health of banks is closely tied to the country in which they operate, since a large amount of their liquidity and equity is invested in government bonds. Italian banks have a large exposure to bonds issued by the Italian government. American banks have a large exposure to US treasuries. UK banks have a large exposure to UK bonds. Swiss banks have a large exposure to Swiss bonds. For wealthy investors, the credit risk of Switzerland is far better than that of the United States, the UK, or any European or Asian country.<\/p>","photo":"images\/BB UBS.jpg"},{"id":3,"tag":"Markets","title":"Greek debt yields converge with those of France","date":"March 3, 2025","excerpt":"Greek government debt may soon become less risky than that of France \u2014 an incredible turn of events over the past ten years.","body":"

Greek government debt may soon become less risky than that of France.<\/p>

In an incredible turn of events over the past ten years, Greece has been able to fix some of its budgetary and debt issues while France is unable to do anything significant to address its well-known problems.<\/p>

As of today, investors consider French debt to be more risky than that of Spain or Portugal, and it could take just a few days before Greece is able to finance itself at lower rates than France!<\/p>","photo":"images\/BB Greece.jpg"},{"id":5,"tag":"Economy","title":"U.S. Trade Tariffs","date":"April 2, 2025","excerpt":"The 90-day moratorium on tariffs does not remove a base 10% tariff for all goods. We expect the moratorium to be extended to fall, and the tariff situation to ultimately be resolved in a manner acceptable to American businesses and financial markets.","body":"

The 90-day moratorium on tariffs does not remove a base 10% tariff for all goods. We believe that the 90-day period, which expires in July, will not be sufficient for the U.S. government to negotiate new tariffs with all countries. Furthermore, July is a month when many government employees, as well as politicians, go on holiday.<\/p>

We therefore expect the moratorium to be extended to fall. During this time frame, the 10% tariffs will be paid by American consumers and businesses, but the impact on the American economy should be manageable. We ultimately think that the U.S. will settle for much less than what Trump or members of his government have asked for, due to the negative economic risks for the American economy.<\/p>

Time is running against the U.S. government. Indeed, with the mid-term U.S. Congress elections in less than 17 months, the situation is as follows:<\/p>

1) The longer the economic malaise persists, the higher the probability that Republicans lose the mid-term elections;<\/p>

2) The higher the probability that the Republicans lose the mid-term elections, the less inclined companies will be to make significant investment decisions, due to the regulatory uncertainty of what could happen in the case of a change in control of the U.S. Congress;<\/p>

3) The longer companies wait to see what happens with the mid-term elections, the worse the economic malaise.<\/p>

And the cycle repeats at step 1.<\/p>

This is why we expect the tariff situation to be resolved in a manner that is considered acceptable by American businesses and by the financial markets.<\/p>","photo":"images\/BB Tariffs.jpg"},{"id":4,"tag":"Economy","title":"The 3 lessons that companies must learn from the defeat of Kamala Harris and the Democrats in the 2024 US elections","date":"November 6, 2024","excerpt":"The outcome of the 2024 US elections carries three timeless lessons for any business \u2014 on listening to clients, communicating clearly, and never taking customers for granted.","body":"

1) Don't take your clients for granted.<\/p>

2) If you don't constantly listen to what customers want, they will go to a competitor that better understands their needs.<\/p>

3) You need to be able to communicate simply to customers what benefits they will get from your products and services.<\/p>","photo":"images\/BB Kamala.jpg"}]