The double-dip recession has already begun
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On US Debt Problem: There are 3 ways to get through our current situation -
a. Austerity (too painful politically and economically, look at Greece - millions of private sector jobs lost, not a single government layoff)
b. Abrogation (as in not paying our debts. Russia and China will be thrilled, lol. There are some debts we have that aren't actually debts - merely obligations - like entitlements and such. These will come down but not enough.)
c. Run the Printing Presses (which is what Bernanke has been doing, it is politically very tempting to print more - make the debt worth less dollars - much easier to do this than austerity so it will continue)
On Demographics: Pimco's been doing a lot of work on demographics, some of their research will be out in a few months. It turns out that there are crazy high correlations between demographics and stocks but you have to use longer time frames because demographics are sloooooooow. Five year rolling average stock market and bond market returns more meaningful than annual numbers in this context. The gist is that people add the most to their nation's GDP growth in their 20's and 30's...they make the biggest impact on that nation's stock market returns at around 40 just as their contribution to GDP growth is starting to level off. This is important when looking at market opportunities around the world and at home.
On Emerging Markets: Demographically speaking emerging markets are getting into the median age sweet spot for GDP growth and then stock market performance - example was in India the median age is not yet 30 years old. China will hit that Great Wall of Demography everyone is worried about (because of the one child rule) but not for 15 to 30 years.
On What to Avoid: Growth stocks and long-dated Treasurys are an avoid. Multiples on growth stocks will not react favorably to a recession and inflation and long bonds are getting dangerous here. The one caveat is that "if Greece or Japan cross the Rubicon" in the next three months, Treasurys will certainly shoot up to even greater heights.
On Apple: Apple investors have given the company the highest market cap in the world - a de facto statement that "Apple is in a position to return more in profits to shareholders than any other company". In reality, Apple just isn't that big, it's not even in the top 40 companies by profits. Investors are betting, at these prices and multiples, that Apple is infallible. Favorite equity pairs trade (half joking I think) might be Long Bank of America, Short Apple - in one case expectations and sentiment pricing in the absolute worst case scenario, the opposite in the other.
On What to Do in Case of Recession: He is staying extremely liquid and underweight equities (only 8 to 12% of portfolios as per public filings), when the market adjusts to the high, scary inflation data and acknowledges the new recession, he expects asset prices to get "appreciably cheaper", but instead of buying the dip in US equities, he is more inclined to take advantage of the Emerging Markets stocks which will likely fall in tandem with developed markets.
On Gold and Swiss Franc as Safe Haven: He wouldn't buy either one looking for big gains and "you'd better hope you don't have big gains in those because you can just imagine what the rest of your portfolio would look like if you did..."
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I'm not currently invested in the funds Rob manages but it was great to hear his thought process and outlook. if you guys like posts like these I'll put them up more often so let me know below.
