MiB: Felix Zulauf on What Drives Markets



This week we sit down with legendary investor Felix Zulauf. In 1990, he founded Zulauf Asset Management, a Switzerland-based hedge fund. Prior to that, he ran the institutional portfolio department at UBS, eventually becoming Global Macro Strategist. He was previously an analyst in the bank’s research department, a position he hated; he preferred top down macro analysis over bottoms up stock picking. He notes that every cycle has a different driver; the last cycle was Housing and Credit; this cycle is China.

Zulauf has been a regular member of the Barron’s Roundtable for the past 30 years.

His parents insisted he learn a trade if he was not going to go to college, and so he selected banking. But he found it boring, becoming interested in stocks instead. Curious as to “what factors drove markets,” he began exploring various schools of thought. He was disappointed at the time to learn that “Europe was lacking in thought leadership.

Zulauf eventually spent a few weeks as an intern working with the legendary technician Bob Farrell in the technical department (he was seated right next to Bob Prechter on the desk). The impact of technical analysis affected the way he looked at market cycles.

He also got to know Alan Greenspan when the future Fed Chairman was an advisor to UBS; they met every three months to discuss world affairs. While Greenspan’s forecasts were “not very good,” he was an economic historian who helped educate Zulauf on the shift from rising inflation to declining inflation and the deflationary processes. Greenspan was “very concerned about another traumatic 1930s,” and that trauma guided his monetary policy as Fed Chairman — “Always too easy for way too long.”

The early 1980s saw Zulauf move UBS to overweight equities (65% versus the traditional 50% in Europe). In the Fall of 1987, he ordered all of his portfolio managers to move to zero percent equities — an unprecedented move for a conservative European bank. He made other legendary calls, including shorting Japan in 1989, warning about the dot com collapse in 2000; he was bearish going into the financial crisis, and in March 8th 2009 said a 40% rally was coming. He does not consider himself a permabear, a moniker that has stuck with him since his call on the 1987 crash. He described himself as “a raging bull” in the 1980s, “pounding the table and nobody was listening.”

Some of his favorite books are referenced here.

You can stream/download the full conversation, including the podcast extras, on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak with Jeremy Schwartz, Director of Research at WisdomTree Investments. Schwartz was Professor Jeremy Siegel’s Head Research Assistant and helped with the research and the writing of “Stocks for the Long Run.”  




Felix Zulauf favorite Books


One-Way Pockets: The Book of Books on Wall Street Speculation by Don Guyon


Market Wizards, Updated: Interviews With Top Traders by Jack D. Schwager


Hedgehogging by Barton Biggs


Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed


The Last Lion: Winston Spencer Churchill: Defender of the Realm, 1940-1965 by William Manchester


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