In Part III of Lance's series of reports from the
10th annual Strategic Investment Conference, presented Altegris
Investments and John Mauldin, the question of how to invest during a
deleveraging cycle is addressed by A. Gary Shilling, Ph.D. Dr.
Shilling is the President of A. Gary Shilling & Co., an investment
manager, Forbes and Bloomberg columnist and author - Mr. Shilling's list
of credentials is long and impressive. His most recent book "The Age Of Deleveraging: Investment Strategies In A Slow Growth Economy" is a must read. Here are his views on what to watch out for and how to invest in our current economic cycle.
Six Fundamental Realities
- Private Sector Deleveraging And Government Policy Responses
- Rising Protectionism
- Grand Disconnect Between Markets And Economy
- Zeal For Yield
- End Of Export Driven Economies
- Equities Are Vulnerable
Private Sector Deleveraging And Government Policy Responses
Household deleveraging is far from over.
There is most likely at least 5 more years to go. However, it could be
longer given the magnitude of the debt bubble. The offset of the
household deleveraging has been the leveraging up of the Federal
government.
The flip side of household leverage is
the personal saving rates. The decline in the savings rate from the
1980’s to 2000 was a major boost to economic growth. That has now
changed as savings rate are now slowly increasing and acting as a drag
on growth.
However, American’s are not saving
voluntarily. American’s have been trained to spend as long as credit is
readily available. However, credit is no longer available. Furthermore,
there is an implicit mistrust of stocks which is a huge change from the
90’s when stocks were believed to be a source of wealth creation
limiting the need to save.
