Massimo Malvestio’s interview with “VeneziePost”

The ESG policies, the race to exchange-traded funds (ETFs), the upcoming recession and the rising inflation. These are some of the key points addressed by Praude Asset Management Ltd.’s Founder Massimo Malvestio in an interview with “VeneziePost”, an Italian news portal.One year ago, in another interview, the value investing expert explained that “if an inflation rate of 5% comes, it would mean that the huge stock of long-term and fixed-rate debt of banks, insurance companies and pension funds would suffer enormous losses”. On that occasion, he also stressed that this is “a completely uncharted terrain”, as “it has never happened that the money supply is multiplied without anything happening. I don’t know what the result will be, we are playing a dangerous game”. As he emphasized in the past, it is like “being on a lake of gasoline: as long as nobody lights a match, nothing happens”.One year later, that lake of gasoline is still there, along with an inflation rate that is approaching double digits. “Inflation had already started before the Russia-Ukraine conflict, which only aggravated the problem”, Massimo Malvestio pointed out: “In my opinion, basically three factors have begun to prevail over the deflationary forces. The first is the abnormal growth of the money supply, which was caused by the expansionary policies of central banks. The second factor concerns the demographic dynamics: baby boomers are on the way to retirement without there being a sufficient number of new people entering the world of work to replace them. What I am wondering today is whether the oncoming recession will also reduce the need for a workforce or whether the problem of aging populations will persist regardless of the recession”. According to the Founder of Praude Asset Management Ltd., the third factor lies in the ESG policies that funds, banks and regulators imposed on companies. This “has put investments in energy resources and raw materials far from the logic of the market”: “Hypocrisy has put Europe in Putin’s hands”, Massimo Malvestio added, while pointing out that, in order to make up for this, “we are now forced to accept not only policies that have nothing to do with ESG principles, but also legitimize interlocutors and regimes that in terms of values represent the exact opposite of what ESG policies intend to pursue”.In the interview, the expert in value investing also stressed that, if a serious crisis occurs, “for the first time in history there will be homogeneity in the situations and the conducts of banks, insurance companies and supervised entities in general. Any errors would not find compensation within the system, and the effects could be much less manageable”. If inflation continues, he said, “I don’t think the ECB will be able to continue buying bonds to support the market as it has done so far”.As Massimo Malvestio emphasized in the interview, “the real problem is that decision-making centers are less and less transparent. Fund managers end up deciding what is ESG and what is not, and nobody knows who the people who take decisions are. Furthermore, their decision-making processes do not have the slightest transparency”. What to expect from the future? “Everyone believes that the recession will bring back inflation. If its rate returns to 1% or 2%, everything can be overcome”. On the contrary, if the inflation rate were to be around 5%, “the lake of gasoline” will catch fire anyway and there will be a great redistribution of wealth, Massimo Malvestio said in conclusion.