Speculative appetite has not declined, which is bad news for global growth - Natixis

Despite repeated financial crises, there are still at present abnormal increases in the prices of certain assets due to significant speculative buying, according to Patrick Artus, Research Analyst at Natixis.

Key Quotes

“This applies, for example, to real estate prices in several countries, US equities, shares of new technology companies, the Bitcoin, rare commodities, etc.”

“The persisting appeal of speculative investments is bad news for global growth:

• It heralds financial crises in the future;
• It diverts savings from investments in productive capital which offer a far lower return than that from speculative investments.”

“We can see therefore that, despite the crises, the appeal of speculative investments persists. This is bad news for global growth:

- Speculative bubbles always burst and can lead to financial crises and recessions due to wealth destruction;

- The return on average capital employed (ROACE) is far lower than the short-term return on speculative investments, and this diverts savings away from investment in productive capital and into speculative investment.”