A Synthesis of Thoughts on the Economy
I have been listening to a wide variety of economists and portfolio managers of late (at least three months), which does not, by any means, make me an expert but does give me a basis for pulling common threads from a very learned group on the broad subject.
To give credit, here are a few: Dr. Lacy Hunt, Andy Schectman, Michael Pento, Danielle DiMartino Booth, Martin Armstrong, Jim Rickards, Peter Schiff, Rick Rule, Mike Maloney, Alasdair Macleod, Dr. Steve Hanke and others.
The first thread, in regards to the macro view of the economy, both US and worldwide, is pessimism. Such pessimism runs from a deep recession, if not depression, is “baked in the cake,” to expectations for stagflation, and most moderately pessimistic a general slow down in economic growth, perhaps drawn out.
The second thread is bubble. More than one have called our current U.S. economic situation as “the everything bubble.” I would estimate that, of those listed, this has been expressed in varying levels of insinuation or hyperbole, by about 75%.
The third thread is uncertainty. Often multiple scenarios are discussed depending, of course, on what the Fed and the government do going forward, many speaking nearly apoplectically about the degree of uncertainty in our economic outlook.
To end the threads on a positive note, the last is opportunity. Such opportunity can arise by active management of portfolios, or catching the next wave of innovation, or simply preserving one’s wealth for the next boom cycle. A sub thread here is, of course from the portfolio managers, have a good portfolio manager.
As to the first thread, the most erudite and data based prognostication of recession is Dr. Hunt’s. Listening to him is a real education, and he is kindly liberal with his appearances. Second, his protege, is Danielle DiMartino Booth. Both of these give innumerable indicators, which I will not repeat here, for their conclusions that we are in for difficult economic times barring monetary and or fiscal actions, and perhaps in spite of them at this time. Dr. Hanke is more colorful perhaps with his “baked in the cake” prediction of recession, based largely on the quantity theory of money. Most also point to this as a worldwide phenomenon, Martin Armstrong the most vocal about the dire economic condition of the EU countries.
As to the second thread, the “bubble of everything” relates to equities, housing and debt. As Harry Dent is wont to say, the higher the bubble is inflated the lower the fall. Some point to early signs of the housing market crash occurring already in various sections of the U.S. More ominous is the commercial real estate bubble, with higher for longer stretching the extend and pretend game to the breaking point. Credit card, auto loan and home mortgage defaults are at ominous levels, with household debt at near all time highs. Equities are the most over valued ever.
As to the third thread, this should be no surprise. Wars and rumors of war are all around us, which could lead to world war. A new administration making extremely large throttle changes in rapid succession, often with little or no “forward guidance” adds to the uncertainty. International developments portending if not the dethronement at least the lessening of influence of king dollar, coupled with an historic purchasing of gold by central banks cause some poignant questions. Is a new Breton Woods afoot?
As to the last thread, opportunity. Given the above, that sounds counterintuitive. The subthread is for those who are prepared. Opportunity for those few who read the tea leaves and take action. I’ll not say what actions I took or what I advise other than to say that it would be wise to listen to these people. I would say, even though many are in the business, that they genuinely come across as trying to warn people, and governments, of possible rough waters ahead. Some offer concrete advice. Others just give the lay of the land. Most, I believe sincerely for others good and due to their concerns, say get a good portfolio manager. If you are not comfortable doing it yourself and also do not have substantial time to get smart enough to do it yourself, I would wholeheartedly echo that advice.