Recovery or Recession?

Investment broker and commentator Peter Schiff recently predicted that in 2013 and 2014 we would not experience economic recovery but rather a worse recession than the one we are currently in.


This is not his first prediction. He predicted the 2007-2008 downturn well before most did and was highly criticized for it. 


Is he correct? He is not alone. Most notably Harry S. Dent has been predicting for many years that the “recession” of this period would last for ten years and that it would come in two phases: a first phase starting in the late 2000s and a second phase to commence in or around 2013-2014. 


Schiff and Dent come at this from two entirely different perspectives even though they have the same conclusion. Schiff bases his prediction on our dismal failure to address excessive debt and under production with over consumption. He sees it as a monetary failure. He predicts a bond failure and therefore a bank failure and allows that some people may lose a lot of money.


Dent does not factor in government policy and while he sees the debt as a major factor he sees the demographics as the major factor in economic cycles. Dent sees us in a perfect storm where the Baby Boomer generation is reducing consumption significantly as it ages and makes more demands on government in the process. 


What is they are both right? It would seem if this is the case a dismal several years lie ahead of us. And since they have both been correct in their predictions in the last decade can we afford to ignore them?


One can hope they are both wrong. One can hope that they have exaggerated the impact of the problems they are analyzing. 


If the collapse is as bad as Schiff predicts there may be precious little individuals can do to protect themselves. While stuffing your money in the mattress may seem an extreme solution, one must wonder how many bank failures the US government can actually avoid.


If Dent is correct the continued distress will be survivable for most if they maintain their investments in cash and selected bonds. He warns against most, but not all, equity investments. Dent sees a major fall in the Dow Jones as inevitable. 


What do you think? Are they correct or even partially correct? And if they are what action should one take?

Wishing you success and prosperity,

Daniel R. Murphy
Helping People Learn to Build Wealth

Wishing you Success and Prosperity,

Daniel R. Murphy

Wishing you well,

Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.