Felix Zulauf: The Secular Bear Market Will Last Another 5 Years

TBI - Pragmatic Capitalism ^ | 7-11-2011 | Cullen Roche

[blam]

Felix Zulauf: The Secular Bear Market Will Last Another 5 Years

Cullen Roche, Pragmatic Capitalism
Jul. 11, 2011, 7:29 AM

Good thoughts here by Felix Zulauf of Zulauf Asset Management (thanks to Barry Ritholtz). Zulauf believes the global economy remains in a deep contraction that has been only papered over by government spending. But he sees austerity setting in now and now contributing to the decline in growth.

He predicts another 5 years in the secular bear market with the S&P 500 dropping to 500 by the middle of the decade.

Additional summary:

* Austerity measures cannot work in a democracy.

* Gold is a currency, not a commodity.

* Prepare for an inflationary depression over the next 3 to 5 years.

* You can hear the entire interview here.
(Click to the site )

(snip)

[blam]

If the government reduces/cuts spending, won't that drive us to a deflationary depression?

Where's QE3?

[SquarePants]

does he mean “cyclical” bear market? “Secular” bear market makes no sense

[yldstrk]

“Austerity can’t work in a democracy” what does that mean?

[blam]

I post these articles to learn from you all.

[BRK]

Apparently, this will be the first godless depression.. LOL

[BRK]

It means that folks will force the Government to spend more by demanding more and more free goodies.

[Red Badger]

1. TAKING MONEY OUT OF AN ECONOMY AND FILTERING IT THRU A GOVERNMENT BUREAUCRACY WILL NOT GENERATE GROWTH OF THAT ECONOMY.

2. PRINTING MONEY WITH NO FOUNDATION WILL DESTROY AN ECONOMY.

3. CRONY CAPITALISM AND GOVERNMENT CORRUPTION WILL DESTROY AN ECONOMY.

4. TAKING GROUPS OF PEOPLE OR INSTITUTIONS OFF THE TAX ROLLS WILL DESTROY AN ECONOMY.

5. UNFETTERED GOVERNMENT LARGESSE WILL DESTROY AN ECONOMY.

6. GOVERNMENT CONTROL, THRU OVER-REGULATION, OF FREE MARKETS WILL DESTROY AN ECONOMY.

[blam]

Here's a link directly to the Pragmatic Capitalism site. There are a number of comments there...maybe some answers for you.

[DaxtonBrown]

[If the government reduces/cuts spending, won’t that drive us to a deflationary depression?]

the big insight I have had is to start looking at things as biflationary (not inflation, deflation or stagflation).

GDP = MV

Everyone only looks at the M term, or maybe the V term, but they are both moving targets. Each sector will be different, but you could have pockets of high inflation and pockets of deflation. I’ve heard it termed screwflation, everything you do is screwed. Bernanke gets away with sying we have low inflation because he’s averaging inflation and deflation, but we all know we are in an economic collapse.

[tom paine 2]

bump

[Daveinyork]

As opposed to a religious bear market?

[oblomov]

A cyclical bear market is one related to the business cycle. Typically, a cyclical bear occurs at the start of a recession, as earnings contract.

A secular bear market is a longer-term bear market related to changes in the broad economic environment or capital structure. The US markets have been in a secular bear market since 2000. This secular bear has been punctuated with cyclical bull markets (2003-2007 and 2009-present).

Zulauf is saying that the trend is still down.

[blam]

Maybe, 'lasting for a long time?'

SECULAR

1. of or relating to worldly as opposed to sacred things; temporal
2. not concerned with or related to religion
3. not within the control of the Church
4. (Social Science / Education) (of an education, etc.) a. having no particular religious affinities
b. not including compulsory religious studies or services
5. (Christianity / Ecclesiastical Terms) (of clerics) not bound by religious vows to a monastic or other order
6. occurring or appearing once in an age or century
7. lasting for a long time
8. (Astronomy) Astronomy occurring slowly over a long period of time the secular perturbation of a planet's orbit

[bert]

My thought......

Two problems
Deficit
Debt

The spending reductions are to eliminate/reduce deficits

Eliminating deficits stops debt growth but does not reduce the debt. The debt, that is the humongous debt, can not be repaid. The debt must be inflated away. The effect of compound inflation and the marginal tax increases from the inflated wages will shrink the debt. Some growth thrown in will also kick in some additional revenue, but inflation is what is being counted on.

The process is not merely American, it is global (except for Switzerland where it is reported first hand that a diet coke presently costs the equivalent of US$12)

[proxy_user]

Zulauf is a permabear. He has been predicting doom for the past 20 years.

Of course, this prediction may turn out to be correct, but his position is not exactly news.

[rbg81]

I wondered that too. My guess is that he think democracies don’t have the will to do austerity (for real).

[Buckeye McFrog]

I think he is right on that point, at least in Europe. Greece will never follow through with the austerity measures, as they will tire of rioting in the streets and challenges to the government. I suspect the French will vote in DSK or whatever Socialist candidate promises to allow them to go back to retiring at age 60 again. And even the Brits will likely crack under the pressure if these “uncut” protests continue to grow.

Whether we have degenerated to the same point I think is something we are about to find out.

[rbg81]

Greece will never follow through with the austerity measures, as they will tire of rioting in the streets and challenges to the government.

---

Well, the rub is that you can only defy reality for so long. We’ve been doing it for decades, so most people can’t imagine any other way of doing business. IMHO, this is a major obstacle to any solution. But, eventually, the unsustainable Ponzi scheme cannot be continued. The problem is that Pols will put off the day of reckoning so long that the inevitable “pain” will be catastrophic to society.

[ReleaseTheHounds]

Good reply and summary for all.