Driving Without a Spare (3 - 5 Year Outlook of Economy)

"The world is on a journey to an unstable destination, through unfamiliar territory, on an uneven road and, critically, having already used its spare tire(s)."

"Through a series of transitions, collisions, and trade-offs (the journey), we are heading to a world that is re-regulated, de-levered, and growing less rapidly in the industrial countries (the destination). It is a world in which concerns about the dark side of globalization temper enthusiasm for its net benefits, and in which politics matter a lot for markets and the economy."

The above quote is from an excellent article by the staff of PIMCO, written by El-Erian and resulting from a corporate confab of the PIMCO staff. PIMCO is "a leading global investment management firm with more than 1,300 employees in offices in Newport Beach, New York, Amsterdam, Singapore, Tokyo, London, Sydney, Munich, Zurich, Toronto and Hong Kong."

Follow the link to the article written by El-Erian who is CEO of PIMCO. He shares management with Bill Gross, who's often called "bond king". PIMCO is also home to Paul McCulley who often comments on monetary policy. Their funds have largely done well during these trying times. Their staff is quoted frequently in the press.

http://www.pimco.com/LeftNav/PIMCO+Spotlight/2010/Secular+Outlook+May+2010+El-Erian.htm

We (the U.S.) clearly have the wrong leadership in The White House and Congress. The current federal government is working hard to do the wrong things in response to crisis. At some point they'll run out of money, options to act, and goodwill. The sooner these people are replaced by rational free-market conservatives, the sooner our economy can mend. Fortunately, it appears as if the voters have already wised up on the Democrats. I hope that the Republicans can learn not to run old, worn-out RINO political hacks.

Harry Dent gets a few things wrong in his book regarding Great Depression II, but he’s right about a few things.

He predicted a new bear stock market by April of this year. I think it took a bit longer (probably due to more government money being pumped in than he thought) but it sure looks like we’re in for a protracted dip in the markets, probably below the lowest levels they’ve hit since 2007. Oil is off, Dent predicts it’ll go to $10/barrel due to collapsing demand, along with an all-around deflationary environment.

There is only so much the government can do to stave off economic collapse, and it’s about done. Mass numbers of baby boomers are leaving the workforce over the next few years, meaning they go from being taxpayers to Social Security consumers. Roh-roh!

In the shorter term, real estate markets remain depressed, commercial real estate is going in the tank, and interest rates remain pegged to zero for the foreseeable future. The government at all levels appears to be responding by raising taxes - a lot. Ugly.

The good news is that eventually socialism will die an ugly death and we’ll be back to mostly unbridled capitalism because it’s the only way out.

All IMNSHO of course. ;-)

‘The good news is that eventually socialism will die an ugly death and we’ll be back to mostly unbridled capitalism because it’s the only way out.’

Don’t bet the farm on socialism dying out. On second though, bet the farm before the socialist come and take it away.

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