You don't cure alcoholism by giving an alcoholic a quart of whisky
I love to read. I think that it is very important for anyone who wants to be a successful investor to read a ton. While I was into books for a while, my latest thing is magazines. Yeah, I know that a lot of the content is available for free on the web, but magazines are so desperate for subscribers that they are practically giving subscriptions away.
Take Sports Illustrated for example. I got an offer from SI yesterday to subscriber for a year, $256 cover price, for $20 AND they'll send me a free NFL jacket of the team of my choice. Are you kidding me? I couldn't even buy a crappy jacket at the store for $20 bucks, let alone one that has a team logo on it. Of course I'm subscribing.
On the business side of things, I get Forbes, Fortune, Kipplinger's, Smart Money, etc... The only publication that I subscribe to that wasn’t dirt cheap is Barron's. One of the benefits of subscribing to it though it that I can get Smart Money magazine for something like an additional $0.99 per year.
This month's issue of Smart Money came in the mail yesterday. I was reading it last night and I came across an excellent interview with Jeremy Grantham. Grantham has been a tremendously successful investor for decades who is known for going against the grain and being bullish when others are bearish and vice versa. He's long stocks right now, but he is not tremendously optimistic about the future. His views on where the U.S. is headed are very similar to what I have been saying here in my blog.
Here's a small portion of his interview that is a must read:
Will we get out of this mess?
The stimulus is so great in the United States, China, and the United Kingdom, it will kick the economy up. GDP will go back to positive for two to three quarters. They'll assume everything is settled, that throwing money at it has worked. But the long-term imbalance between over-producers [like China] and overspenders [like the U.S.] will continue. It'll be a multiyear drag on growth.
We're just throwing money at the problems?
If the problem is that we consumer too much and borrow too much, does it make sense to borrow more and spend more? It doesn't make sense to solve alcoholism by giving an alcoholic a quart of whiskey, but everyone believes that we must stimulate. So that's why we feel this is a temporary cure. This is like when you revive a drunk, he staggers down a few blocks, then falls down again.
That does not sound promising.
We're not rich, and we're undersaved and underpensioned. Those will be a real brake on economic growth. This will be a pretty long recovery period, longer than we're used to, but hopefully not as long as Japan took. It will not be as long as the Depression, but it will be several years, and not just two. Lord knows we have had several fat years.