Apocalyptic views of the next few decades are coming thick and fast. Tyler Durden summarizes an interview here with MB Advisors founder and CEO Milton Berg:
Here is the reason why Berg believes you can invest in the market today, go to sleep, wake up thirty years later and have made no money…
“Well, it is not unheard of in history. As you know there was a bear market in bonds lasting maybe forty years that began in the mid-40’s and ended in 1980. We’ve had a twenty, twenty five year bear market in Japan going back to 1989. We’re the most overvalued market in history, there’s more leverage throughout the world than there’s ever been in history, central banks have lost all their ammunition, basically because there is so much credit outstanding throughout the world. It’s not unheard of to have a long-term bear market. There will be a lot of money to be made both on the downside and the upside within the bear market.”
…..When asked what would happen if central bankers were to follow through on their whatever it takes promises, Berg gave the most rational response….
“If whatever it takes means Zimbabwe, or hyperinflation Germany, stocks will do well, but not relative to the inflation rate.”
Not sure that I agree with the 30-year bear market conclusion, though it is a risk.
We had a three decade easy-money credit binge, which saw debt rise to extreme levels, followed by a (2008) violent heave in which markets attempted to purge themselves of the excess debt. But central banks intervened to prevent the purge out of fear that the contraction would (as in the 1930s) cause long-term damage to the global economy.
The accepted wisdom is, or at least was, that rather than allow debt to contract and cause a deflationary spiral that would damage the financial system, instead suppress the contraction and wait for economic growth to gradually restore debt to more acceptable norms over time. There is just one problem: the economy is becoming even more bloated with debt and has stopped growing…..
The only solution is a managed contraction over the next decade, with central banks winding down their balance sheets and an unavoidable market purge. If combined with a coordinated program of government/private investment in productive infrastructure, we could see a recovery within 10 years.