What if there is stagnation?

In Commodities, Economy, Investments, Property on 21/10/2011 at 6:49 am

A few days ago, I blogged that were three scenarios for the developed world. Growth — buy equities; inflation — buy property and commodities; and recession — buy government bonds.

Thinking about it again, there is a  fourth scenario: stagnation. There will be shallow recoveries and recessions in quick succession.

In that scenario, one should be looking at buying equities for their dividend yields, and the corporate bonds of super blue chips.

  1. couple that with inflation (which could be a real threat due to rising costs in BRIC and in food staples) and you’re back to the stagflation era of the late 70s in the US.
    That would be a nightmare for all.

  2. How about depression? Or Japanese-style “lost decades”? Hold cash/gold.

  3. What you mentioned is similar to what is written in the book titled “The Age of Deleveraging” by Gary Shilling.

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