Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, September 08, 2005

How to Prepare for the End of the Bubble

I am not entirely convinced that there will be a massive de-bubbling of the economy. Housing prices are easing in most markets, though, and some think that spells future trouble as consumers are becoming less able to dis-save by spending the equity they have built up in their homes. Here is a summary of the views of fund manager Bill Gross, from Market Watch [h/t to Sean]:

Investors should prepare themselves now for the end of the U.S. housing bubble by avoiding assets like equities, real estate, corporate debt and junk bonds, said Bill Gross, managing director of Pacific Investment Management Co.

In his monthly investment outlook, Gross advised investors to "cut the fat" from their portfolios.

Gross, a well-regarded bond bull, said the housing bubble is likely to either stop inflating, deflate or pop within the next few months, leading to a slowdown in economic growth. Read his commentary.

...If the bubble ends, investors must prepa re for the "debt liquidation" that Federal Reserve Chairman Alan Greenspan warned about 10 days ago, Gross wrote.

I have been concerned about overall asset inflation for the past year myself and have rebalanced my self-directed pension funds to be a bit more liquid than they used to be.
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