Then, as now, and forever

Kent was formed in 1990 and has gilded the Swedish music scene for 26 years. It has sold more than 2.3 million albums and has several times been named Sweden's greatest rock band.

The band's decision to play its final concert on December 17 in Stockholm marks the end of an era.

I cannot help but draw a parallel with what has happened in the financial markets during Kent's active years.

Kent was formed right in the middle of Sweden's big real estate crisis. During the second half of the booming 1980s private debt had gone from 100% of GDP to 150%, and property values had become inflated as the export profits of many major companies were reinvested in real estate. The bubble burst in October 1990, with the collapse of finance and real estate company Nyckeln, sparking a real estate crisis that lasted until 1994. Prices for commercial real estate fell by 70-80% in the major cities. In the end the government was forced to rescue some of the era's banks through the creation of bad banks, and speculation against the Swedish krona finally led Sweden to abandon its fixed exchange rate in 1992, causing a devaluation of 40% against the US dollar.

After the painful transition of the 1990s, Kent has been playing through an IT boom, a subsequent IT crash and renewed vigorous growth driven by emerging economies, particularly China. And then another crash, firstly in the US property market, then in mining, then in southern Europe's heavily indebted economies and, as recently as this year, in oil prices.

Back to the present, and policy interest rates are the lowest the world has ever experienced. Meanwhile, total debt in Sweden has increased to record levels of nearly 300% of GDP. However, the costs of managing this debt mountain are still so low that interest payments are manageable for now. But if we look at things in the perspective of Kent's 26 years as an active rock band, we cannot help but draw parallels with what led up to this current time. Speculative debt, then partly triggered by a favourable tax regime, now more driven by extremely low interest rates. Highly inflated real estate prices and record-high debt. Perhaps the circle closes there?

During the summer and autumn a few colleagues have left us and some new ones have arrived. We now have a management team of a total of 10 people, with combined experience of over 180 years. Some of them have been active in the markets throughout almost the entire era described above, and have experienced both strong markets and several of the corrections. We are very aware that the current market is challenging, with negative risk-free interest rates and many years of strong returns behind us, for both stock markets and fixed-income markets. However, I am convinced that we now have the collective knowledge, experience, drive and desire to perform even though the conditions are less favourable.

Unlike Kent, we have absolutely no thoughts of quitting. We hope to be around for a long time to come, and we want to continue to make a difference for you as a client and to continue the close dialogue that we believe is the basis for a good partnership. Then, as now, and forever.

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