Tuesday, June 10, 2008

'Lazy Portfolios' for stagflation 2008-2018!

From MarketWatch:

What'll you do if this market trades sideways ... for 10 years?!

Stagflation till 2018? I can hear you screaming: "Ten years of no growth? Plus inflation? Plus high volatility in a narrow trading range?" You're crazy!
Well, I was at Morgan Stanley during the 1970s, looked at billions of dollars of depressed real estate for clients. Stagflation lasted into the '80s, over 10 years. Painful stuff. On top of all this, in several recent columns we've reported on a bigger bubble blowing and a meltdown coming by 2011. Folks, the era of happy-days and happy-talk is over!

Even if we don't get 10 years of bad news we know 2008 is already bad and getting worse. In his latest Insight Newsletter long-time economist and Forbes columnist Gary Shilling reminds us the U.S. recession is unfolding in four phases: "Two Underway, Two Just Starting." First two: The housing disaster and the Wall Street meltdown will continue at least through 2010. "Phase 3, a massive consumer retrenchment, the worst since the 1930s" is just kicking in. "By year's end, Phase 4 should start as falling U.S. consumer spending cuts the imports that fuel foreign growth.">>>MORE