The first installment of the Barron's Roundtable came this week. The panelists discuss the general outlook for the year, and then Felix Zulauf and Mario Gabelli gave their investment recommendations. No way could I ever give an adequate overview of everything said. So here are a few key parts standing out to me.
Asked about the economy in 2010, Meryl Witmer said:
There will be some pickup because we are filling the hole created last year when everything stopped. There is some inventory fill, and some growth in health care and electronics. But I see no growth engine in the U.S. Hopefully, there will be a turnover in Washington, but without that, I don't have much positive to say.
On job creation in America she said:
In the past six months, whenever I have talked to a company I asked the chief executive or chief financial officer what it would take to bring jobs here. They said, "You know, the workforce isn't that good, and there is so much regulation. I'm moving jobs out of the U.S." The government needs to cut back on regulation and taxes and open things up for business, or the jobs will continue to leave.
This from Fred Hickey:
The stock market will likely be up this year, unless the dollar collapses. The Fed will continue to print. It doesn't have a choice. Other countries backed off investing in the U.S. Central banks are buying gold. Who will fund our deficits? The Fed will keep printing until the dollar falls apart.
Not to be outdone, Marc Faber added:
That is why we are all doomed. The deficit will be above a trillion dollars a year as far as the eye can see. One day, Mr. Bernanke or whoever is at the Fed will have to increase short-term interest rates. When that happens, America's interest burden will go up dramatically. Interest payments could go to 35% of tax revenue in 10 years' time, but that is an optimistic assumption. I'm inclined to think 50% of tax revenue will go toward interest payments on government debt in 10 years. Then you are bankrupt. There is only one way out -- the Zimbabwe way. You will have to print and print and print.
To which Felix Zuluaf agreed:
It is true. All federal debt, including unfunded liabilities, isn't 100% of GDP, but 600%. In most industrialized countries, federal-government debt is between 350% and 360% of GDP. Eventually the U.S. will arrive at the point where, as Marc says, interest payments on government debt all of a sudden go to 20%, 25%, 30% of tax revenue. And once you go above 30%, you are done. You go into default or your currency breaks down and your system collapses.
Gold is among Zuluaf's recommendations. I think he's been bullish on gold for at least the last several Roundtables. Here's what he says:
Finally, gold could have a correction sometime this year, but investors shouldn't let their gold go. Gold could correct to $1,000 an ounce from a recent $1,130. Use that shakeout to buy. Gold is the only currency with no liabilities. It can't default. It is in a bull market. In the disbelief phase, it fell to $811.70 an ounce. Now it is in the recognition stage, and eventually it will go to the overbelief stage and trade for a few thousand dollars an ounce. It will take a few more years. Gold will perform better than stocks in the next five years.
Zuluaf reported owning physical gold, but says the SPDR Gold ETF (GLD) is fine for most American investors. I own it myself, as you know. He also thinks gold stocks will "fly" at some point but that bullion plays are the safest bet.
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