Dr. Doom says we are headed for a depression

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I don't find it funny either. We are probably at 15% or more unemployment right now and may be headed over 20%. Even if you want to assume everything spools back up in a relatively short timespan, there is no way all those people get reabsorbed into the economy any time soon. Given how important consumer spending is and how leveraged the US economy is, this isn't going to be good.
 
So what is the best investment in a deflationary environment?
 
Gumby said:
So what is the best investment in a deflationary environment?
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We haven't seen one since the Depression. Back then, very long term fixed rate high grade bonds (treasuries especially) would have been ideal. With the treasury market heavily manipulated and rates very low, hard to say. Definitely not equities of generally highly leveraged companies.
 
brewer12345 said:
I don't find it funny either. We are probably at 15% or more unemployment right now and may be headed over 20%. Even if you want to assume everything spools back up in a relatively short timespan, there is no way all those people get reabsorbed into the economy any time soon. Given how important consumer spending is and how leveraged the US economy is, this isn't going to be good.
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+1 Consumer spending was 70% of GDP.
 
brewer12345 said:
We haven't seen one since the Depression. Back then, very long term fixed rate high grade bonds (treasuries especially) would have been ideal. With the treasury market heavily manipulated and rates very low, hard to say. Definitely not equities of generally highly leveraged companies.
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Perhaps we go into a negative yield environment for a short time.
 
I think many small businesses won’t survive which will mean no jobs for some people to go back to.
 
Gumby said:
So what is the best investment in a deflationary environment?
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IMO: Stuff. Stuff that makes money. Multi-family housing.

Now if the rentals are seized and burned to the ground to rid them of the plague that might not be too good. Or if we end up providing housing gratis because a governor declares a moratorium on evictions or we're just big softies things might not work out. Don't really want to add to our rentals, but it may be an opportunity for others.

Very happy to have a large property loan that was going to pay off in January finally payoff and have the cash land in our bank on Monday. Of course now it makes a big 1.4%, but our security blanket is extra puffy now and we're primed for opportunity.
 
Gumby said:
So what is the best investment in a deflationary environment?
Click to expand...

As others have said, historically it'd have been long-term Treasuries (up ~21% YTD BTW). But at 1.20% on the 30 year? I kinda doubt it (though if we do see negative interest rates - a distinct possibility - they could still be one of the best-performing asset classes).

Roubini's imperious tone and seemingly total certainty about his forecasts are seriously irritating but I don't find a whole lot to disagree with in his analysis.

Portfolio Charts has had a series of excellent articles lately on recession (not Depression) resistant allocations. Here's the most recent one:

https://portfoliocharts.com/2019/08/20/the-top-4-portfolios-to-recession-proof-your-investments/

I don't think most here are going to be enthusiastic about going all-in on some of the more esoteric allocations featured but perhaps there are some good ideas to be gleaned. Roubini specializes in detailing how the sky is falling without offering any solutions and I think that's irresponsible at best.
 
jazz4cash said:
But, but, but I won’t have to go back to w*rk, right?
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Exactly. Why go back to work when unemployment pays more. Hopefully the boss will go broke and not call me back. ( Anecdotal experiences here in Michigan)
 
sheldon cornped said:
Unlessin you can't get enough of the pessimissin, go to Youtube and check out Gerald Celente, a perma-pessimist. I go there occasionally for entertainment value. Man this guy has a big axe to grind. His message never changes.
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Same thing with TheMoneyGPS onYoutube. Short 10-15 minute videos of utter disgust. lol
 
I didn't read the article, but Mr. Roubini is always bearish no matter what the market is doing. So I really do not pay any attention to what he says. He'll be right once in a great while, but really I could throw darts at a dart board and do just as well.
 
I am in the camp that agrees we have challenges ahead. All the bankruptcies have not started yet which will increase the unemployment numbers further, the Fed and Government are bailing many out and next up might be our cities and states (talk has already started), etc. I could go on and one but why? I think we can all project the potential fall out that may/will last until a vaccine or herd immunity. And what shape will we be in then?
 
Yes, Roubini is a perma bear. No one ever talks to him unless we are in a bad situation. He was on the business news channels constantly in 2009 and if you’d listened to him you would have missed out on a huge recovery.
 
Roubini may be a doom and gloomer but he invested in stocks back in 2009.

So how are Roubini’s own funds invested? They are 100 per cent in equities. In the long run stocks do best and he is not yet close to retirement, so he keeps putting more money into index funds each month.

https://seekingalpha.com/article/126841-nouriel-roubinis-portfolio
 
Starsky -That horse left the barn a long time ago. Tracking, isolation, and quarantine needed to be started on January 12th the same day Taiwan did it to be effective and we needed to shut down all international travel at the same time both in and out of the US. That still hasn't happened. Our leaders decided to basically let it run wild as none of the policies for mitigation are even remotely effective. What idiotic policies were implemented are obviously ineffective and were more for voter re-assurance than to mitigate the virus spreading. There is actually no centralized system for this and it breaks down to 50 completely different systems and even within states it can differ from county to county.

We have no centralized database for medical records (perhaps we are the only country without it?) either so it is an impossible task. Now all we can do is to test the population for antibodies later and try and figure out who all has had it and who has not. The best recourse now is to focus on treatments. Remdesvir doesn't look too promising despite reports so we will see what comes out of a good controlled trial. Only one has been performed and it did poorly although the company is doing great on the stock market. An expected cost of treatment of $4,600 per patient will help their profits.

Additionally, this virus is still mutating and we are no seeing completely new symptoms (particularly in children) so it is a moving target. Assuming it only affects the elderly was an enormous mistake.
 
On a side note I agree with Roubini but it will be different than in 1929. We didn't have a complete breakdown of society then but I expect that to happen this time should people start to go hungry in America. The wealth inequality is too large to ignore and our policymakers still continue to demonstrate they only serve the rich. If things don't change it will not end well. I hate it as all my retirement income is in dollars. I would move it over to something else but what currency will remain stable should a depression happen again?

Now we are on the verge of a war with China and this time if our idiots in charge keep pushing hard it will come home to roost and Americans might finally taste what it was like for the rest of the world during WWII. A China/US war will not be only in China. Americans have never suffered an invasion by a foreign power so it could be devastating. I don't think this will happen but mistakes get made and there are crazy people in positions of power in both countries.
 
Old Microbiologist said:
On a side note I agree with Roubini but it will be different than in 1929. We didn't have a complete breakdown of society then but I expect that to happen this time should people start to go hungry in America. The wealth inequality is too large to ignore and our policymakers still continue to demonstrate they only serve the rich. If things don't change it will not end well. I hate it as all my retirement income is in dollars. I would move it over to something else but what currency will remain stable should a depression happen again?

Now we are on the verge of a war with China and this time if our idiots in charge keep pushing hard it will come home to roost and Americans might finally taste what it was like for the rest of the world during WWII. A China/US war will not be only in China. Americans have never suffered an invasion by a foreign power so it could be devastating. I don't think this will happen but mistakes get made and there are crazy people in positions of power in both countries.
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It is highly unlikely that either country has the appetite for a land war in it's opponent's heartland. Any military conflict will be a limited naval thing in the south China Sea, or a proxy war. More likely the conflict remains economic and political.
 
Brewer - it is true in that China has never invaded anyone since Genghis Khan and so far seems to follow the Russian model of asymmetric response to American aggression. However, these are weird and strange times. Some people in the American administration believe that every country will back off from a conflict (started by the US or it's proxies) and that China will do the same. I am not so certain of that. China plays a very long game and has always believed they will once again rule the world. In some ways this is already happening as the US cannot survive at all without Chinese imports.

We will see new sanctions and trade embargoes which may be enforced with the Navy which should they attempt capture of Chinese property will be met with force. Should the US try and enforce US policy against China militarily then it will be met with a direct and overwhelming response. I am not confident those in the current hobbled administration understand China at all.

I am also quite aware that the typical US response to a recession is war. A depression even more so.
 
Gumby said:
So what is the best investment in a deflationary environment?
Click to expand...

SCI: Service Corporation Intl. This company is an American provider of funeral goods and services as well as cemetery property. Headquartered near Houston ,TX , SCI operates more than 1500 funeral homes and 400 cemeteries in 43 states, 8 Canadian provinces , and Puerto Rico. Granted, YTD the stock is depressed but will probably bounce back quicker than many since their customer base is plentiful.

The funeral business is very good now, not only because of the virus, but the inevitable uptick in suicides and deaths related to incidences of homicide related to domestic violence since so many are at home for longer periods of time.

Funeral homes have been quick to adapt to the current environment. A funeral director about 5 minutes from my house was on the local talk radio program this morning detailing the "drive thru" viewing. They bring the casket out on wheels to the entrance of the building and the family and friends drive up one at a time to view the casket and then drive off. Plus this funeral home is one of the few in my county which offers in house crematory service which is important to many Asian cultures.
 
Old Microbiologist said:
Starsky -That horse left the barn a long time ago. Tracking, isolation, and quarantine needed to be started on January 12th the same day Taiwan did it to be effective and we needed to shut down all international travel at the same time both in and out of the US. That still hasn't happened. Our leaders decided to basically let it run wild as none of the policies for mitigation are even remotely effective. What idiotic policies were implemented are obviously ineffective and were more for voter re-assurance than to mitigate the virus spreading. There is actually no centralized system for this and it breaks down to 50 completely different systems and even within states it can differ from county to county.
Click to expand...

The political statements in this post may get the thread shut down. No? I disagree with your statement that the mitigation policies were for voter reassurance. A country doesn't shut it's economy down for voter re-assurance. I better stop there.
 
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