Things seem very bad right now.
All of the news media is extremely negative. This latest correction has very quickly brought all of the superbear doom and gloom economists (i.e. David Rosenberg, Nouriel Roubini, Eric Sprott, Robert Prechter, etc.) out of the woodwork once again to preach about The Demise of the United States, the Elimination of the Middle Class, the Continuing Decline of the US Housing Market, Rising Unemployment, and the fact that gold is the only safe place to be. There is even talk of war to stimulate the economy. It's almost as though there is a competition among analysts to see who can be the most negative or create the best negative brand. You may recall that the opposite was true in 2000, when it was cool to be positive.
Technically speaking, Japan has been in a "depression" since 1990. Currently, the Nikkei is en route to retest its 2008 bear market lows. If this correction worsens, Japan will lead us into the abyss. Fortunately, despite being in a 20+ year depression, Japan is a very nice place to live. They have the world's longest life expectancy, the best social programs for its citizens and are a much more culturally cohesive society that Europe or the west. I'd like to live in Japan, despite it being in a depression.
Yesterday, on the Lang and O'Leary exchange, Amanda Lang questioned David Rosenberg as to what an ordinary investor can do to protect themselves during another depression. Although Mr. Rosenberg may be a well seasoned and respected economist, his answer was poor. He argued that we're likely two thirds the way through this secular bear market which began in 2000. He recommended adopting laddered bond strategies to maximize yield and adopting long / short equity strategies to protect from a declining stock market. I'm skeptical that these strategies actually work to provide better than average returns over the long run. As a general rule, the more complex your investing strategy is, the poorer your long term results. I'd like to know David Rosenberg's 10-year portfolio return.
At least we'll know we're at the end of the Good Depression when the big banks start routinely selling laddered bond funds and long / short equity mutual funds to retirees.
