Who is he?
(basically the same, just more personal detail)
How can he benefit me as a financial
What is his
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portfolios (.pdf format - Adobe Acrobat necessary to read)
How we are swimming in
a sinking US dollar.
His stock picks and pans.
What articles has he published on management?
Investigating problems in the workplace (.pdf format)
Mentoring, correcting, and disciplining employees
An inside look at a peer evaluation system
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The Titanic Economy
or "The water that you feel above your knees is not your
by Laurent J. LaBrie, MS Business Administration
Laurent J. LaBrie is editor of Longs, Shorts, and Mini-Skirts Click here
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Summary: Laurent La Brie believes that, like the Titanic speeding in the icy waters, America's economy and dollar are in perilous times. To not lose money and your house in the stock market, his recommendation is that people employ investment advisors who know how to invest for the long-term.
US, in my view, remains on a dangerous and reckless course--consuming
out of asset-based saving at a point in its demographic life-cycle when
it should be building up income-based saving to fund the looming
retirement of 77 million baby-boomers. Record lows in the personal
saving rate and the current account deficit, to say nothing of record
highs in household sector indebtedness, all speak of a US that is living
dangerously beyond its means. Subsidized by unusually low
interest rates, in large part underwritten by equally myopic foreign
investors and governments, America has managed to keep the magic alive.
But there's nothing sustainable about that arrangement.
If America stays this course, the
end game will not be pretty, the day will come when US interest rates
rise -- driven by either domestic or foreign developments. That
would undoubtedly spark a painful unwinding of the Asset Economy --- all
the more conceivable now that the US housing market is firmly in bubble
territory. Equally worrisome is America's anemic job creation and
the related shortfall of organic income generation.... Like it or
not, the United States remains mired in the mother of all jobless
recoveries -- making the perils of excess consumption all the more
~~Stephen Roach, Chief Economist of Morgan Stanley, December 6, 2004.
Note that these aren't the words of some loony gloom and doomsayer but
come from the #1 economist of one of the largest investment houses in
the world. Also, it is not political rhetoric. It was
written a month after
the election. So, I'm not alone in
forecasting problems ahead for the US economy. Many leading economists
agree with me. The Bank Credit Analyst, one of the most widely
followed and respected research groups in the world, has entitled 2005
"A Year of Living Dangerously". They are known for having
forecasted boom years for the 1980's so they are not gloom and doomers
My comments on Mr. Roach's observations.
- I have been singing the song of Paragraph 1 for at least 5
years, saying that we are due to hit the wall in 2007-2009.
- My problems with Mr. Roach's ideas start in paragraph 2. With
unemployment approximately 5%, the rate long considered optimal, I can't agree
that this is a "jobless" recovery. (Economists say that any less than 5%
means that people are not changing jobs to ones they fit better.) With the
employment rate peaking at 6.4% during the post 9/11 slowdown, it is probably
more correct to call that time the "jobful recession." There is reason to
believe that these numbers are approximate, since not everyone declares their
unemployment. I could be considered by some as unemployed, and I'm not in
- I agree that the economy is in a precarious position.
- I don't think US interest rates will rise significantly for a
decade, so I don't believe that this will be the precipitating force of
the fall. I forecast a stock market crash that will move people to
buy bonds. This, of course will lower interest rates. I
think if we have a major terrorist strike, this could hasten the fall.
But, it would have to be more significant than the WTC attack.
An attack on the water supply or something similar that strikes
more than one city and a few thousand people would be needed to hasten
- My scenario continues to be slow economic growth for 2-3
years until a major stock market decline occurs. That decline is
more likely to be a slow decline of 20-30% a year for 2-3 years than a
1929 style crash. This disrupts the economy as businesses can't
raise capital except through borrowing. People lose jobs and can't
pay their mortgages. Banks come in and take their homes and
housing prices decline as the housing bubble bursts. Some people
find out that the money they borrowed for their house is more than what
the house is worth. This means that they have more debt than asset and a
negative equity in their home. They lose more than the money they
put into it and go bankrupt. Their cars have to be sold also to
pay their housing debts. Detroit, which has already had a hard time
turning a profit on cars, is hit hard as few people will replace that
second car they can't afford. Auto industry and housing industry
get clobbered and the companies that supply them get fewer orders.
America goes through a 1930's style depression in the 2010's.
What to do?
- Don't listen to those saying, "Oh, it will never happen."
The ship has already taken on water, sinking 31% of the
way into the water. See comment 7 below for details.
- Get out of debt. Debt is not biblical and God
knows why. Get the house paid off or move to a smaller one while
you can get a good price for your large one and while there are still
smaller ones available. Pay off those credit cards so that if you
lose your job, you are not going to lose the things you need to live.
- Reduce your exposure to the US Dollar. The dollar you
stashed in your wallet or mattress in on 1/1/2002 is now worth 69 cents.
To make this more visual, if you were on the Titanic and the top
of your head was the equivalent of the dollar having no buying power,
the water level would be up to your thighs. If you haven't
made 31% on your investments in 3 years, you also have less money.
Those who followed the Longs, Shorts, and Mini-Skirts stock advice have matched that return, so the water
is only lapping at our toes. But the stock markets have increased
only 17% over that time. So, with regard to what you can buy
with the proceeds, most likely your stocks and mutual funds are
worth 14% less than they were 3 years ago.
The water is up to your shins. (Past returns are not
necessarily indicative of future returns.)
- Have the right investments. This is my department and I
hope to steer as many as possible effectively through it as we rotate
between sectors as timely and swiftly as a sailor in a storm trims and
fills the sails to get to port without capsizing. There is no
guarantee that we will make it, which makes the whole thing so exciting!
However, you will be a lot better off than those who are having a
fun party, going down with the ship, "buying and holding". Many
professionals don't remember or accept what happened in 1929, nor do
they believe what Morgan Stanley and dozens of other knowledgeable
people have said is likely to come. I'd venture to say that none
of them were around the last time it happened and few Americans have any
personal recollection of those days. There is no institutional
knowledge among the pilots, and most are saying, "Ignore that water on
your knees, this is the new economy!"
I am not saying you are going to drown. But for those of us who are
under baby boomers or below, I can virtually guarantee that the water
will come up to your waist. And I believe it will hit the average
American's chest, as the dollar loses another 20-40 cents and they have
1/2 of what they have now.
If you have more than $50,000 saved up, it is time to have a
professional investment manager to help you.
Write me an e-mail at
want to get in our lifeboat.