Most Popular ArticlesDecember 29, 2009
Are you opposed to allowing the Bush tax cuts to expire at the end of next year?
It depends on what they will be replaced with. Even Obama didn’t want them to be replaced with the old tax rates. We will have to see how it actually turns out. There may be some increases in high income tax rates. That increase may have to wait a year or two to see that the economy gains good footing.Â
I’m not at this point worried that heavy taxes will snuff out the recovery.
But your forecast depends on keeping tax rates pretty close to where they are now.
Not too much different.
At what point will inflation become more of a long-term threat in the context of projected deficit levels?
I expect inflation to be higher in the long term than it is now. I think it will be in the 3%-4% range, which is doable. In the long run it will erode the real value of the huge indebtedness that we have without causing any rapid depreciation or devaluation in the dollar.
For a long-term, retirement-oriented investor, do you recommend a 100% allocation to equities?
Bonds are terrible now. I would not go into commodities. I would be internationally diversified. I think emerging markets are going to do very well. US stocks, especially global ones, will do well. European stocks, again especially the global ones, will do well.
Your dislike of bonds is based on your secular forecast for interest rates.
There will be higher inflation so there will be higher inflation rates.
What about TIPS?
TIPS yields are too low. The 10-year is at 1.37%. You are going to have principal erosion. When these TIPS were issued they were 3.5%, and now they are half of that. TIPS yields will go up to 2% or 2.5% and you will have capital losses.
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