Monday, October 17, 2011

Nowhere To Hide - Forbes

The Economist  cover line gets the mood perfectly, just as it did two weeks ago with “Be Afraid,” about the bad prospects for the economy. “Nowhere To Hide” refers to the dangers of investing today. It suggests cash is king, as this blog has done in recent weeks. It reminds us just how much money was lost by those who sat in Japanese shares in 1989– before that deluge– as it sniffs out a Japanese-style stagnation for the US and possibly the rest of the world.

Treasuries are a risk because the current rate of inflation is 3.8%– more than the coupon on 30 year bonds(3.10%) or 10 year notes(2.10%) Equities look expensive especially if  corporate profits are about to drop off.  In short, it’s a bloody predicament that has got a great many people holding tons of cash until they  see if Europe stabilizes without a sovereign  crash and a bank solvency crisis– and what that would portend for the US.

Savers in cash are waiting to see if the politicians can straighten out the world. They are plainly anxious about the prospects for 0% GDP by the developing world going forward. A hard landing by China wouldn’t help matters. “Investing  during a time of crisis,” the Economist theme catches the notion of the immediate future not looking promising.. We are “confronting the next leg of the most intense deleveraging  cycle in modern history,” says David A. Rosenberg, the proverbial bear at Gluskin, Sheff in Toronto, who has been absolutely correct in his predictions.

We are in a global recession scenario that is going to get worse before it gets better. It is a time of utter discontent.

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