October 18, 2018

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12 investments to sell or avoid

Here are some kinds of investment to avoid

Big Ticket Consumer Purchases

Big Ticket Consumer Purchases

The 12 categories on which he is negative are:

• Manufacturers and distributors of big-ticket consumer purchases such as cars, appliances, air travel, cruises, and leisure and hospitality providers. As consumers save more, they’ll curtail spending on expensive postponable items.

• Credit card and other lenders to consumers. They’ll be burdened for years by the new focus on saving, and horror stories about what personal debt can do to you.

• Conventional home builders and suppliers. Burdened by excess inventories from the past building boom and the evaporation of home-owner investment interest.

• Antiques, art and other tangibles. They need high inflation and upper-income people flush with cash to do well.

• Banks and similar financial institutions. Their executives are likely to act very conservatively for a generation, with a focus on lowering risk rather than boosting earnings.

• “Junk” (high-risk) securities. Deflation will be lethal because the borrowers will find it difficult if not impossible to service their bonds.

• Flailing companies. Below-average revenue growth, high fixed costs and big debts will be “a lethal combination in an era of slow growth.”

• Low- and old-tech capital equipment producers. In the advanced economies the focus will be on productivity-enhancing equipment rather than capacity expansion.

• Commercial real estate. Vacancies are rising, rental levels for new tenants have collapsed and prices are plunging.

• Commodities. Excess supply and muted demand will keep prices under pressure, but more important will be the collapse of investment/speculative demand.

• Developing country stocks and bonds. Emerging markets overwhelmingly depend for their growth on exports to the US, where there is going to be major retrenchment in demand.

• Japan – “a slow-train wreck.” An ageing and shrinking population, cautious consumers, huge government debt, failure of the money-printing policy.

CopyRight – OnTarget March 2011 by Martin Spring

This article followed on from – Prediction: unemployment to continue rising

and is followed by – Ten investments to buy

and is part of the series starting with – Survive and Prosper in the Grim Decade

Prediction: unemployment to continue rising

Prediction: unemployment to continue rising

Unemployment to Rise

Unemployment to Rise

Shilling says the US economy will grow at an average rate of only 2 per cent a year — compared to the growth rate of 3.3 per cent needed just to keep unemployment stable, let alone soak up the existing pool of un- and under-employed. A study by the Federal Reserve of Kansas suggests this means that unemployment, instead of falling, will continue to worsen, at an average of nearly 1 per cent a year.

“The mind-set of American business will probably promote robust productivity growth in future years” from the internet, biotech, telecom and semiconductors. “As in the past decade, American businesses will likely continue to be more interested in not hiring people than in firing them.”

Over the next decade, because of slow economic growth, unemployment will be high and rising – unless there are huge job-creation programmes by the federal government. Shilling believes that is definitely going to happen as no government, whatever its economic philosophy, “can withstand high and rising joblessness for long.”

Shilling lists “12 investments to sell or avoid,” and “ten investments to buy.” I must warn that these recommendations are made from an American perspective. He largely ignores prospects in specific sectors of other economies, or for government bonds other than those of the US.

CopyRight – OnTarget March 2011 by Martin Spring

this article follows on from – A surfeit of leading-edge production plants

which was led by – Survive and Prosper in the Grim Decade