Today I want to continue with the hard-hitting analysis of our public pension problems and say more about personal storm preparation. We all have some very important choices to make.
After a sustained period of return leadership by U.S. stocks, a number of diversifying assets now appear poised for outperformance.
At the October 2002 market low, the S&P 500 stood -49.2% below its March 2000 peak (-48.0% including dividend income), with the Nasdaq 100 having lost more than -82.8% from its high, on the basis of both price and total return. The loss wiped out the entire total return of the S&P 500, in excess of Treasury bills, all the way back to May 1996.
Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago.
China is dropping its focus on “dirty” industrial growth, while making a massive shift toward renewable energy and a less resource-intensive path to economic success. This reorientation could open up substantial opportunities for equity investors.
The main contributors to the illusion of permanent prosperity have been decidedly cyclical factors. Investors presently appear to be taking past investment returns and economic growth at face value, without considering their underlying drivers at all. My impression is that while the U.S. may very well encounter credit strains or other economic dislocations in the coming years...
This letter will be the first of a series in which I outline my vision for the next 5–10–15–20 years of global economics. I understand that there is a substantial amount of hubris involved in such an undertaking, so I will approach the topic gingerly.
Current extremes present what I view as one of the three most important opportunities in history to defend capital. My sense is that many investors will squander this opportunity until yet another bubble implodes.
What causes financial crises? Unfortunately, mainstream macroeconomists have very little to say about the subject, given their decision to ignore the role of money, credit and finance.
Instead of delving deep into one subject, I’ll give you my quick thoughts on several different items. They aren’t connected to each other, nor do they build up to any sort of conclusion. They’re just what is on my mind as we wrap up summer 2017.