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Author: trader2012 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 2:11 PM
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What I find puzzling is that you have said that you expect the U.S. to experience severe economic problems fairly soon (I interpret this to mean recession or depression). Yet you are still buying lots of lower rated junk. Isn’t there an inconsistency in this strategy? Or is this just insurance, in case you are wrong?

Howard,

The US is already in a recession/depression. There are too many people in the bread and soup lines to conclude otherwise. Federal tax receipts cover only 60% of Federal spending. The rest is coming from borrowing. That isn’t sustainable. The US cannot grow its way out of debt by going deeper into debt. Sooner or later, markets will ask that the bill be paid, and the US will default on its obligations, as it has done so in the past. When markets crash, I’ll take a hit, maybe as much as 60%-80% of AUM. But enough will remain that my life style will be unaffected. Food will still go on the table. The taxes will be paid. Books, beer, and bait will still be bought.

My parents survived their depression, just as their grandparents survived theirs, just as I’ll survive the one now facing us, whose worst days are yet to come. For the US to follow Japan's multi-decades, deflationary path would be a best case scenario. But it won't happen here due to our differing demographics and differing foreign policies. The Japanese were/are savers. The US is not. The Japanese were/are mercantilists. The US are neo-colonists, still dreaming of empire. Guns or butter? The US wants both, but can afford neither. So the 21st Century will belong to the BRICs.

The hard times never last, just as don’t the easy times. What matters to me isn't capital (which can always be found) but market skills. That's why I'm keeping my hand in the bond game, as well as scrambling to find new ones of a more traderly sort. I'd like to report substantial progress, but I can't. Finding/creating viable investing/trading gigs isn't an easy thing. Also, it's hard to be as motivated as I should be to find them when markets are presently so complacent. But Fear and Terror will return sooner enough, and then I do whatever I have to in order to pull more money out of markets than I bring to them. That sort of a workday will cut into my fishing and boat-building time. But that, too, is just how life is. So one enjoys the moment, and then deals with the future as it happens.

Charlie
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