“Investors Have Been Lulled To Sleep”: BofAML Deep-Sixes The Recovery Myth
Right so, part and parcel of the whole "wealth effect" meme is the notion that higher asset prices will inflate the value of things like 401ks and thereby embolden the American consumer whose purchases account for three-fourths of economic growth.
Or that's how it was supposed to work. Deliver a multi-trillion dollar defibrillator shock to financial assets and in the process, hope the resulting paper gains are enough to make people forget about the enormous destruction of wealth that occurred
>The problem now is that we’re late cycle and we never really seemed to have hit escape velocity. That is, it kinda, sorta seems like the crisis may have permanently impaired the economy.
I would suggest two main causes other than the GFC:
1. Demographics, you can’t have 1980/90’s growth when there is a shortage of workers.
2. Productivity, executives figured out if they used profits and debt to buy back shares they would be rewarded via stock right away, rather than that stupid old school thing of investing in equipment and training to increase production and improve your margins.
Robert Shiller of all people said yesterday that the stock market could go up 50% from here. 50%. Now I know that the world has lost its mind.
>Stocks are “highly priced now, which means I don’t expect them to outperform so much,” he said. “But for a long-term investor and most people are, I think there should be a place for stocks in the portfolio and they could go up a lot from where they are now … they could also go down.”
Yeah – Stocks could go up or down. But do have a place in a long term portfolio. Damn, I know I have lost a step over the years, but it is sad to see the very talented to go on too long. Trust me I know what is like to lose a step. He should be out on a beach enjoying an avocado.