Production – Consumption Disconnect

Today’s employment number continues the pattern that started last fall, companies continue to ramp up into a demand brick wall.

This week’s Outside the Box letter by John Mauldin, see our links section, goes into another aspect of the current situation. Here is what John says in the intro:

“This week’s Outside the Box is a selection from two essays written by an old friend of my readers (and my good friend), Dr. John Hussman. His recent work has been rather forceful in pointing out that expectations of total returns from the US market over the next seven to ten years are dismal. That conclusion agrees with work I have done in conjunction with Ed Easterling, with Jeremy Grantham’s posts at GMO, and with the work of Robert Shiller (mentioned below). There are numerous other analysts who approach the market differently, but the general conclusion is this: investors with a five- or ten-year time horizon are going to be very disappointed unless they have some methodology to deal with the risk of a significant market downturn.”

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