April 23, 2010 – Learn to Live With Deleveraging

Featured Trades: (GLOBAL DEBT/EQUITY RATIOS)


3) Learn to Live With Deleveraging. I am frequently asked for the basis of my long term growth target for the US for the decade of 2.5%, down from 3.9% for the previous one. Well, here it is. Deleveraging and balance sheet repair is going to be a driving factor for governments, corporate management, and individuals for many years. Banks have gone back to the old days of only lending money to people who don’t need it. The chart below of Global Debt/Equity, which I have pulled off of Paul Kedrosky’s Infectious Greed website, suggests that we are at the beginning of a multiyear trend. That means less cash for buyers of everything, including , stocks, bonds,  commodities, consumer goods, and of course, real estate.

debt-equity_2.png picture by madhedge