Bill Miller has named geopolitics as the biggest market risk he is currently guarding against, and said the only real winner from prolonged problems will be investors in cryptocurrencies.
In his quarterly letter, the US equity veteran said political impasses, most notably in the US, play into the hands of those operating in alternative market areas, such as gold and cryptocurrencies.
‘Geopolitics remains the single greatest threat to the markets. The president’s low approval ratings and an energised Democratic Party could lead to turmoil as the debt ceiling looms in the spring and the election rolls around in the fall.
‘One consequence of increased geopolitical dislocation might be another very large increase in Bitcoin’s value, as it is increasingly seen as isolated and insulated from the conventional economic system.'
His comments come as Bitcoin neared $10,000 on 26 January having peaked at $19,783 on December 17 before a snap correction at the start of the year.
‘I think all investors would prefer more stability and less drama, except perhaps those whose only investment are crypto assets or gold,’ he added.
Miller has emerged as a strong investor in cryptocurrencies, having placed large bets in his flagship fund over the final quarter of 2017.
He told CNBC he had diversified it from being focused in one single portfolio to several of his funds at the start of the year.
Looking at the market more broadly, Miller said bonds are, as many market commentators have suggested, now clearly in bear territory. This he said will prove a huge boon for equity buyers.
‘Bonds have outperformed stocks for an entire generation and have done so with lower volatility and greater inherent safety due to their contractual payouts.
‘That era is now over in my opinion and stocks will revert to their historic return premium over bonds as global economies grow, and central banks around the world follow the Fed in ending quantitative easing and reducing their balance sheets.’