The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick
Kevin: Our guest today is Dirk Steinhoff. David, today I am excited to hear from Dirk, because he actually has real experience with some of the things we have been talking about.
Two weeks ago we had John Williams on, and he was talking about an event that he feels is coming in the next couple of years that could translate to hyperinflation.
David: There are two ways to look at inflation. You can look at it just as an economic event. You can also look at it as a social and cultural event. Knowing Dirk for many years now, as an asset manager, originally from Germany, living in Switzerland, working with Frank Seuss and the group at BFI Wealth Management. I have known him well, and some of his personal stories. It is interesting, because this goes beyond economics. It goes to the existential. It goes to “my family experienced this.”
Kevin: It is deep in the fabric of his family.
David: That is one perspective that he brings to wealth management, and looking at the Eurozone – stability/instability. Dirk, thank you for joining us. We are looking at a lot of things that are happening in Europe today. Just as we have sought to have perspectives from someone like Felix Zulauf, we would like to have both a German and Swiss perspective on the eurozone crisis.
Dirk, we have known each other for several years. As an asset manager in Switzerland, having been raised in Germany, and now living in Switzerland, but still seeing things from, clearly, a German perspective, there are so many things happening in the eurozone. Why don’t we start with the big picture, where you might have an interesting insight in terms of eurozone stability or instability? From a “European” perspective, or from a decidedly German perspective, and maybe it is even influenced by where you live today, but where do you think the eurozone is in the cycle of either regaining stability, or moving toward even greater instability?
Dirk Steinhoff: First, thanks, David, for having me here. Yes, what is happening in the eurozone, the final outcome is still open. I can’t tell you what direction we will go. What we expect is that we will see that the weaker countries will have to leave the eurozone. They will quit the eurozone. The stronger countries will not keep them out, because the strongest country in Europe, Germany, could not do that for political reasons.
What we see in Europe right now over the last 1-2 years is that they are actually preparing for the incident that some countries will quit. They are shifting the bonds from the countries which will most probably leave the eurozone, they are shifting those bonds from the banks toward the ECB so that the bailout will be paid by the taxpayers and the consequences will not be borne by the banks. It is still open, but from what see, the weaker countries will leave the eurozone at some point. They have to leave the eurozone, because otherwise their competitiveness is so low that just tightening the belt and restructuring debt will not work for the future.
David: One issue that has been implemented, or an attempt at implementation, this year, was austerity. To what degree has that been the correct measure, a successful measure, or will that be something that backfires as it goes from political discussion to actual implementation?
Dirk: Austerity in Europe is mainly proposed by the strong countries, the middle and northern European countries, whereas the southern European countries and the eastern European countries prefer going ahead with printing money and going into more debt, in order to stimulate the economy. The austerity requirements or suggestions come mainly from Germany, also Austria, the Netherlands, and some other countries. It is a fight between those countries.
The arguments from both sides are that we have to pay anyhow, so we have to decide whether we want to take the pain now or later, and because of the history in Europe in countries like Germany, they know that the price will be much higher that you have to pay when you postpone the consequence. There are some forces in Europe, in Germany, that would just tighten the belt now to take the pain now. There will be pain, definitely, but less than postponing it.
Of course, countries who, having received for many years and years, funds from the European Union, for them the option is much harder, so they, of course, prefer not to change the system. And there is a lot pressure on the German stance in this situation. It is not only from the Southern European countries, it is also from the United States.
They also would like to see that Germany goes the way, or Europe goes the way, to print money, that the ECB does the same as the Fed. To a certain extent, the ECB does this already, so they have changed course already, back from what they used to do, just taking care of currency stability, and not taking care of the economy. This was the original idea when the ECB was designed, that they should act and behave the same way as the German Bundesbank. They changed this already, so they are telling you that they are buying Greece debt.
David: Is it fair to say that is not unlike the Fed here in the U.S., where with time, there has come new mandates added to the old?
Dirk: Yes, they are doing it, but not to that extent, and it is still not the way that all countries agree on. So it is always a discussion. And there are also more and more people saying, “We have to stop it, because this does not solve the problem. We cannot print our way out of this situation.”
David: Bundesbank conservatism is something that everyone assumes who looks at Europe and says, given the history of Europe, given the monetary nightmares, more recently, in Hungary, but if you go back a century to the teens, you have the German hyperinflation, and that really does inform many of the members there at the Bundesbank. Is it fair to assume that conservative bias remains, or are we seeing the Bundesbank begin to compromise, given the concerns that they have about the depths of this crisis?
Dirk: I think that because conservatism is still there, but I have the feeling that they exchange people within the ECB, which has a different point on that, so they exchange members, which are typically conservative, and very concerned with members who have a different view on that, who are much more open for money printing. So it is changing, but it is still, by far, not the way the Fed is changing, so I think there is political pressure. And of course, it is not only Germany any more who had the same. There are other countries with votes, as well, and they try to bring in their views, so they have to make compromises.
David: As you know, we have a business in Brussels that deals directly with gold, and the last 3-4 months we have seen it almost impossible, really, since the summer forward, to find physical product in Europe. This is filtering in from Germany, Switzerland, France, from all over Europe. There is virtually nothing available because individuals in Europe have been buying physical metals. Is that a change from 2, 3, or 4 years ago, where perhaps Europeans were not interested, and obviously were not as concerned, given the banking crisis, which they might have viewed as nonexistent, and now is in their faces as something they have to deal with?
Dirk: I would not say that it has changed. Over the last 5-10 years, especially the Germans, the Swiss, and the Dutch were buying gold because of their history of inflation. Inflation fear is always with them. It is always with us because we experienced super-inflation, hyper-inflation, and although it is almost a century ago, it is still in our heads. But you are right, it is increasing, so more and more people see some parallels to what happened a century ago, and more and more buy physical precious metals, but it is really concentrated in some countries in Europe. You can also see countries who did not suffer from hyperinflation, where there is hardly any buying because they do not have that history of protecting against inflation.
David: Back to banks within the eurozone, specifically, in Switzerland, at the periphery of the eurozone, Swiss banks have kept official interest rates very low for a long time. That has been attractive for a lot of countries to finance their real estate in Swiss bank terms. What issues would remain, with Swiss banks, particularly, having gained, perhaps negative exposure, to the real estate markets in Eastern Europe?
Dirk: As far as I know, the exposure is not with Swiss banks. You are right, the mortgages are written in Swiss francs because interest was pretty low in Eastern Europe but these were mainly Eastern European banks or particularly, Austrian banks, one of the largest mortgage banks in Eastern Europe.
David: So we might focus concern on Austrian banks as we see things deteriorate in Eastern Europe?
Dirk: It could be, yes. It has to be watched, but Swiss banks, according to the numbers I read, they have only a little exposure to the real estate market in Eastern Europe. It was mainly mortgages given by Austrian banks denominated in Swiss francs.
David: So it is a currency issue, not so much a financial institution vulnerability.
Dirk, before you moved to Switzerland and became an asset manager with BFI wealth management, your background, you spent your entire life in Germany. I wonder if you could just explore a little bit of your biographical sketch so that our listeners would know, for an asset manager in Switzerland, certainly there are numbers, financial issues, economic issues, which bear on the decisions that you make, but perhaps in the back of your mind the experiences which also inform a perspective. You and I have talked about Jason Zweig’s book and there is the existential or experiential knowledge that is gained from being in a certain context and maybe you could explore that a bit.
Dirk: Yes, as you mentioned, I am from Germany. I was born in Berlin, raised up in West Berlin, in the free part of Berlin. The family background is that my father’s family used to live in East Germany, but they had to flee East Germany before the wall was built. This influences, of course, my view of things, because we have family experience of what can happen if you have to go away quickly, you have to flee, what it means to your assets, that there could be a time when you have to leave and you cannot take your assets with you.
Of course in our family we have the whole German history, that my grandfather, of course, told me about of both World War I and World War II, all these crises and currency reforms, that wealth can be destroyed, or can be lost, quickly. This is why Germans are, I think, particularly aware of the situation and they prepare themselves, so they know about the value of, for example, real estate, or precious metals.
David: In the instance of real estate, clearly, it is a tangible, but if you owned it in East Germany and had to leave, one of the things that you are walking away from is that particular asset class. Am I correct?
Dirk: Exactly. This is why real estate, only to a certain extent, really gives you safety and security. Another issue is that the Germans also learned that, especially in bad times, in inflationary times, governments freeze the rent first. Suddenly you have real estate where you have to pay for the maintenance and insurance and all these expenses in an inflated currency, but your income coming from rents is frozen, so it would put you in the situation that expenses are so high that you cannot support the house any more.
David: Certainly, the real estate experts in the United States that I talk to always argue that rental real estate is ideal from an inflation standpoint, because to the degree that inflation is increasing, you can increase your rents. What you are suggesting is that one is not always in control of that.
Dirk: In fact, absolutely. We can see in other countries that as inflation increases too much, governments will take two steps: First, they will freeze the rent because it is easy to sell, and it is easy to blame the homeowner, so it is easy to sell because real estate property in general is held by many people, but rental property is held only by a small percentage of the population, so any measurement against the people having rental property, it is easy to sell, and easy to explain to the people.
I was just talking about how governments freeze rents, but what also happens, as you can see in Greece and Italy, is that they tax real estate quite high. Real estate owners are seen as generally wealthy, and they are also easy to tax because they cannot flee. They cannot take their real estate with them. They cannot go away. So, yes, I would say, in a mild inflationary environment, real estate will protect you.
In a super- or hyper-inflationary scenario it depends on, first, if the real estate is paid off, because if you have to refinance your real estate in an inflationary time, then of course, it could also kill you. And second, when I said that rents are usually frozen and taxation on real estate is pretty high, so this is why Germans also love precious metals, people having experienced those environments, because with precious metals, you can take it away, you can hide it.
David: It is portability. You are talking about, really, some of the most basic elements of what it constitutes. It is portable. It is small. It is concentrated. There is a two-way market anywhere in the world in stuff that actually is not that glamorous, but are the elements which make it unique and different than other tangibles such as real estate. Love real estate, but understand its limitations, particularly if you have to leave it behind. Was there any recourse? Did your family ever have access to that real estate again?
Dirk: Just back to the real estate again, its portability and tradability, because precious metals always need to sell. If you have real estate, it can be a situation when you cannot sell the real estate – portability and tradability.
What happened with the real estate with my family, what happened is that my grandfather had to flee East Germany because he could not raise his kids in a socialistic and communistic way, and of course, he could not take the real estate with him, so it was lost. We tried to get it back after the unification, but there was no way. It was confiscated and it was quietly sold at a very low price to high communist party members, so it was lost.
David: Dirk, you may know Ian McAvity. He writes a great letter. We had a conversation with him several months ago when he described the dog bone philosophy. If you don’t know what back yard you are going to end up in, you might as well hide a bone in every yard. There is a sense in which, if you are able to leave with a part of your wealth, then portability is certainly an important component, but even that is not always the case, is it?
Dirk: Yes, that’s true. As I said, my grandfather had to flee East Germany and he could not take his real estate with him, but he was actually well prepared for a crisis, he had learned his lessons from the first and second world war and from all the inflations before, so he had physical precious metals. He had some nice Mexican gold coins. He used the back yard approach. He dug his precious metals into his garden.
David: His real back yard, his actual back yard?
Dirk: Yes, his real back yard. He put the gold coins there. But the situation was that when he had to flee East Germany to West Berlin, he could not take anything with him because at that time, if they saw people wanted to flee the country, they arrested them, and if you had anything with you, of course, it was dangerous because it would have been clear that you wanted to flee. The back yard approach is a good one if you have access to it at the time of the crisis, and if you can take it with you, but in this case, he could not take the gold coins with him. It was the back yard approach, and it is still the back yard approach, because the metals are still there.
David: They are still in someone else’s back yard?
Dirk: They are in someone else’s back yard, yes, so this is why the lesson I learned is that you have to have some of the precious metals outside of the location, or outside of the country where you expect the crisis may be, because it could be that you won’t have access to it, so you have been well prepared, but you cannot profit from it.
David: This is, in large part, why we cooperated several years ago, around the global gold project, so that someone who wanted a different geography for their metals – gold, silver, platinum, palladium – could, in fact, hold it in a different jurisdiction, and that jurisdictional diversification, for us, is important, because as you describe it, there are instances in which even what you have in your back yard is not accessible. You can’t get it, or you can’t take it with you.
Even that important component of portability is denied if the interests of the state are against your own interests. Of course, this was a very malignant period of time. We hope that every government, our own included, is more benign and benevolent, but we do know something from history, that in periods of financial desperation, sometimes political desperation is a part of that.
It is the classic distinction between the 1% and the 99%. The 1% is the easiest to abuse, because you have popular support. You have the 99% of the population that would say, “Well clearly, they are to blame. Clearly, it is them who have abused the system to their benefit for so long.” That is the populist argument and support for it.
As you look at 2012, this is an immediate question, and then maybe you can transition to more of a 2014, 2016 time frame, a little bit longer out, what you think the most important considerations are for investors today – the European perspective, clearly German, Swiss, and you keep a grasp and are appraised of a variety of asset classes. Where are the greatest risks? What do people need to be concerned with this year, and then over the next two to three?
Dirk: In the short term, it is very important to find the right assets you want to go into, what are we heading to, and for us, it is very critical to find out and to see whether we will see inflation or deflation in the short term. For us, it is not clear yet. There are signs that it could go to a deflation scenario. Quite frankly, we have just seen the Swiss CPI number, and it is –0.7, so in Switzerland we are already in a deflationary scenario, which, by the way, people like. Governments and central banks, especially governments, always try to sell their printing of money that they do to fight deflation, that deflation is always a monster, that this is something you really have to fight against.
David: But for the consumer, declining prices – when was it ever a bad thing for the price of gasoline to go down, or the price of a bowl of vegetables to be less? A decline in prices is healthy for a consumer.
Dirk: It is healthy for consumers, and there is nothing bad about it. People in Switzerland like it, of course, very much, because they get more for their money. There is already some deflation in Switzerland and it is not seen as a real threat, at least not by the consumers.
David: On the point of deflation, getting more for your money, that is a critical statement, because if you look at the last ten years, or even a broader swath of time, let’s say the last 100 years, there are only a few times in that 100-year stretch where if your assets were denominated in gold, then we have just gone through massive deflation. Housing is cheaper than we have seen it in ages. College education is cheaper than we have seen it in ages. Turning things on their head, looking at gold as what we believe it to be, real money, if it is, in fact, a currency, then actually we have been through a massive deflationary cycle where everything has just gotten a lot cheaper.
The real problem is that there are a lot of people who don’t have their assets denominated in gold and haven’t benefited from that. To what degree would that be unwound in a paper deflation? Obviously we are talking about a gold deflation where the gold owner is the beneficiary.
To illustrate one thing, in the U.S., the average single family home in the last five years has gone, in dollar price terms, from $219,000, to $164,000. That is, in dollar terms, a 25% decline. In gold ounces, that house that used to cost 460 ounces, now it costs you 99 ounces, a 78% decline in value. Your purchasing power is going up astronomically. Instead of one house, just simply five years ago, now five years later, with the same assets, you can buy 4.6 houses. We have a deflation. Should we be afraid of it? Are you talking about a monetary, as in dollar or fiat deflation, where there is a de-leveraging and a contraction in paper values?
Dirk: Talking about the monetary deflation, measured by the CPI numbers, which come from the government, from the measurement standpoint of view, it is really critical to see if we see monetary deflation or monetary inflation. This is critical, because in each scenario we have to go for different asset classes to protect yourself, or to have a nice performance. For us it is not clear yet, so we have quite a large cash part in our portfolios because we want to see a clear trend in this so that we can allocate those funds into the right asset classes.
David: With a more clear trend.
Dirk: With a more clear trend. Right now it is very hard to find any trends apart from the precious metals. The precious metals are in a long-term up-trend and we believe this will stay with us for more time, but regarding equity and bonds, for us it is in a more sideways range, or maybe even it is a downside trend. But this could change. In a monetary inflationary scenario, for example, equities could be a good investment because if your company is producing something, that is better to have if there is a monetary inflationary scenario and the economy is doing well. Whereas if we see deflation, which could come also from austerity measurements, then of course, if there is less money available in an economy and the consumers have to tighten their belts, if governments tighten their belts, then you cannot assume, or you cannot expect, business is doing well, because their turnover is going down.
David: Your mention of equities brings us full circle to what you said earlier relating to real estate. Real estate can benefit from inflation as long as it is a mild inflation, but if it becomes a more aggressive inflation, what would you suggest is the threshold in terms of aggressive inflation, where perhaps real estate and equities lose the ability to re-price rapidly enough? Are we talking about double-digit inflation? What would you consider a ballpark inflation number where you don’t think equities or real estate might be able to keep up?
Dirk: I think they will be able to keep up as long as people don’t fear hyperinflation, so I think it is not important what number it is, I think it is really the expectation about where it will end, and at the very moment expectation that inflation will turn into a super- or hyper-inflation, then those assets won’t hold their values.
David: That is certainly what we saw in Germany. Equities did hold up in 1919. They did hold up in 1920. They did hold up in 1921. But by the time inflation rates were pressing 200% and above, and that specter of hyperinflation was no longer in the back of someone’s mind, but it was something they faced on a daily basis, as in 1922, 1923, all of a sudden equities fell behind, so it was sort of in the latter stage where they fell off. But you are right, the first stage, they did just fine.
Dirk: Yes, exactly, so your point is right, equities will be a good investment in the first phase in an inflationary scenario. If it goes up too strong then precious metals will be much better.
David: Realistically, the amount of debt that is in the system in the U.S. is off the charts, and we are not the only ones. In fact, we are not the largest debtor in the world. At least in terms of the rollover of debt this year, the Japanese actually have more debt to roll over, over 3.1 trillion, and we are at 2 and change.
So we have debt concerns, the Japanese have debt concerns, many in Europe have debt concerns. There are European banks which have to roll over in the first quarter alone, 650 billion dollars in liabilities. There really is a good reason, isn’t there, to think that there could be a de-leveraging, or a discounting, of that kind of paper obligation, the “I.O.U”?
Dirk: We can also see a situation, as we had in 2008, in which there will be a huge de-leveraging which takes place. To a certain degree, I think we see this already in the bond prices. Being in bonds was a good investment over the last year. So de-leveraging, people go out of risk, they are looking for safety.
David: Do you think there is some confusion in the investment markets today, that whole categorization of risk-on, risk-off? It was just last week in Financial Times where they described gold as front and center in the risk-on mode. Is gold in the right category as a risk asset, or is that just a popular notion? In the city of London, in the city of New York, looking at gold, still denigrating it, and saying, “Well, it is understandable to see why people would move in, risk-on only, pure speculation.” Is that the right appraisal, or might you, in a de-leveraging scenario, see people moving into gold as a reasonable credit?
Dirk: We are seeing this already. The perception of risk is still the same with most investors, as it was decades ago. From our perspective it has changed, so for us, being in precious metals is more conservative and is less risky than being in bonds. But the investors in the market still tend to agree on the perception that for them, bonds are risk-free, or almost risk-free.
But there is, of course, a huge risk, because there is so much investment from pension funds, from large investors, in those bonds, that if interest rates would change, would go up, the price, the value, of those bonds, will fall. What most bond investors forget is that these movements can go quick. It is not that a bond cannot fall. We have seen this in 2008 where bonds can lose, within weeks, 5, 10, 15 percent, so what is accepted as little risk is wrong.
If interest rates would start to rise stronger, then the losses on the bond side will be substantial, and many people will be hurt because people tend to go to bonds because they are afraid of the stock market, it is too risky, so they are going to something which they see as safe. But what I see is that they will have to change their expectations, because they will see that those safe investments are also pretty risky and you can lose a lot.
David: It sounds like that will be a difficult challenge for many in the market, because, at least in the U.S., we are trained very early on that equities are risky, bonds are safe, categorically. No explanations, no circumstances driving one market or the other, just everyone has this conception that bonds are safe, equities are risky, and that may have to do, ultimately, with bankruptcy proceedings of a company that is going under.
Obviously, the equity shareholders are wiped out and the bond-holders are not necessarily wiped out, or completely wiped out, they have priority. That being said, it is not to say that an investor can’t experience a lot of volatility in bonds. Do you think investors have the ability to adapt and learn on the fly, so to say, learn quickly, when they are seeing losses in what they consider to be a safe portfolio, and they can’t really come to grips with what is happening to them versus what they have been told should be the case?
Dirk: That depends on who the investor is. I think individual investors, small investors, are pretty flexible to change their strategy, so they will adapt.
David: Perhaps, as the institutions and pension funds won’t move fast enough.
Dirk: Exactly, because they also have regulations, so they are not that flexible. They cannot move out of bonds into something different without changing regulations, so they have certain percentages they have to have in some asset classes. If interest rates go up and bonds lose, it will be the institutions and the pension funds taking the big losses.
David: They already have a problem with unfunded liabilities, the ability to take care of their pension obligations. They don’t have enough money, in many instances in the U.S., to make a payment on their pension obligations. That would be a miscalculation that would put them deeply, deeply, deeply in the red. Might you say, going back to that long-term perspective, 3-5 years, the insurance companies and pension funds may be an area to watch with quite a bit of concern?
Dirk: Yes, we were just talking about investments in the short, mid, and long term, and I said that in the short term, for assets, it is not clear if it will be inflationary or deflationary from the monetary perspective. We see, in the mid and long term, a much higher likelihood that we will have inflation, so that in the deflationary scenario, governments will try everything to get out of the deflation scenario by printing money.
And finally, all the money which is printed and already in the system, but is somehow held back so far, will flood the system, will bring higher interest rates. This is exactly what you are talking about, those higher interest rates in the mid and long term will hurt bonds, will bring bond prices down. This is, of course, not positive for such bond-holders like insurance companies, and pensions funds.
David: Dirk, as we wrap up, let’s play a little game here. You are familiar with the Rorschach tests in which they show you a picture and you give your first impression. It may look like an ink blot and you say, “It looks like a beautiful bird of paradise.” Or, when I say the word, derivatives, what comes to mind?
Dirk: A huge bubble, and most of them totally unnecessary, only for speculative reasons.
David: We have a couple of issues which still have to be sorted through on the road to recovery. As your final comment, what would you be looking for to verify that we are taking the right steps in the direction of recovery, economically?
Dirk: It is hard to say if there are anywhere the right steps to take, or if they are available. I think we have reached, or are beyond, the point where we can go back, without pain, so there will be pain anyway. It depends on if you want to take the pain now or later. The right steps, from my point of view would be taking the pain now. It hurts, but it hurts much less than if one postpones it.
I know that with this view, I am not alone, but it is still in the minority. I think most people prefer just going ahead with what we did over the last decade – just postpone the pain. We call it the muddle-through scenario. Everyone hopes he won’t be out of power, or he won’t really experience the final outcome. It is a question of how long it can be postponed. It surprises me that they already could postpone it that far. I would have expected the problems we have right now to have taken place earlier, so governments and central banks are able to postpone, so maybe they are also able to postpone the consequences for many more years than we would expect by now.
David: Some of your sentiments reflect, and echo, another Swiss money manager who has been on the program before, Felix Zulauf, in Zug, not far from where you are.
Dirk: We just met him two weeks ago.
David: The inflationary depression, being something, as you muddle along, in which central banks do the best that they can with the tools that they have, to jump-start the system, and that having ultimately an inflationary effect, but with very little impact to the real economy, as we unwind several decades of excess credit and over-consumption.
Dirk, great to see you here in the Bahamas, and look forward to seeing you again in Switzerland, for any one of the excursions that we have had before, and adventures, and hopefully, the markets smile on us this year.
Dirk: Yes, let’s hope for that, and thanks for the invitation, David.
Kevin: David, it sounds like the European Central Bank is starting to take on some of these time bombs, or maybe they are not time bombs, but maybe the fuse is lit and they are fuse bombs, but one way or another, they are trying to save the individual banks and shift it onto the taxpayer.
David: Exactly, and thank you, Dirk, for sharing that with us. It is the issue of maintaining bank stability, maintaining stability within the financial system, and beginning to shift those potential nightmares onto the ECB balance sheet so that the collective taxpayer across Europe can be paying the bill. On the one hand, it makes good sense because you won’t have the financial institutions impaired. If that were the case, you would see a major hit to the European economy. The complexity of the European economy would fold in on itself if there weren’t a free flow of bonds via the bank system.
But frankly, as a taxpayer, I find that very abhorrent, and a situation in which there is not a logical consequence for bad choices made. Again, that grates against me a bit, but an interesting perspective, Dirk. Thank you for that, and just to see, in high relief, what the ECB is doing. Again, I guess their long-term goal is, of course, to bring about stability in the eurozone.
Kevin: Not only stability, Dave, but it just seems like there are common themes. One of the common themes is inflation. The other common theme is socializing risk. Every time they get the chance, they socialize risk.
David: And privatizing reward. Ultimately, I think, the politics, whether it is in Europe or in the United States, will not allow for that.
