Recession-Proof Investment Strategies

Excerpts from Dr. Enzio von Pfeil's November 18, 2008, appearance on CNBC Asia, Worldwide Exchange:

1. Asian economies are in technical recession - how does that impact your investment strategy and asset allocation?
   • Investors have discounted this mess for the past six months.
   • Thus, I have no major changes to my investment strategy/asset allocation.
2. What are some investment themes up to the first half of 2009?
   • The next bubbles that have to burst are:
     • Long-dated bonds, on account of the rising US and other budget deficits, and
     • The dollar itself.
3. Which markets and sectors do you especially like?
   
   • No markets, as the global Economic Time™ is virtually the same everywhere: the chickens of irresponsibility are coming home to roost.
   • If one must be in markets, then invest in “vital” sectors like consumer staples, food, healthcare. At least, they won’t get hurt as much because people still have to have these products and services.
4. Current earnings so far - what's your outlook going forward?
   • Earnings will go down even more. The Economic Clock™ is clanging for:
     
     • Excess demand for money, and
     • Excess supply of goods.
   • Under such a scenario, it is impossible for corporate earnings to improve. Indeed, “layoffs” news has just reached our shores in Hong Kong.
   • This implies that neither turnover nor margins can rise.
5. Is there anything else you may want to highlight?
   • Obama’s influence on China and vice versa. It seems like Obama will have to go protectionist, as many of his voters expect this. Meanwhile, Chinese officials will start taking their wrath out on the local operations of U.S. multinationals – something which my most recent book, Trade Myths: Globalization and the Trade Balance Fallacy, warns of.
   • Bond blow out. Seems like markets are not quite aware of the extent of public debt that is being created now that the chickens of irresponsibility have come home to roost.
   • Cost push stagflation. We have been bleating on about this since Spring 2006, so at some point this will occur. This will hit particularly those countries/areas whose currencies have fallen the most against the US dollar, e.g. Euroland (rapidly morphing into Neuroland).

Comments

[MarvinMBA:]

Sounds like the correct ongoing recession is going to turn into a Depression if its not a Depression already. This overall rapid decliine
in Real Estate, Financials, Automotive and Technology is going to make
things impossible to cope with all at one time. Jobs are the key and where are they???

2008 Nov 18 10:00 AM

[hisen1:]

Are we going into a depression ?

2008 Nov 19 08:47 AM

[hisen1:]

Are we going into a Depression? If so what will it look like in today's world?

2008 Nov 19 08:48 AM

[yank:]

To answer your question about are we headed towards a Depression. The answer is yes. Especially if as the author suggests, Obama turns to protectionism. Added to the "tax the rich" scheme and you have precisely the recipe Hoover chose, which led to the Great Depression. One more time. Obama is NOT experienced or even qualified to lead us out of this economic morass. But it's too late now. The 19-30 year olds decided that path. And these are the same people who haven't even entered the work force yet. Heaven help us all.

2008 Nov 19 10:17 AM