Mauldin Conference – Lacy Hunt

Lacy Hunt is the Chief Economist of Hoisington Investment Management. He’s got other credentilas, the essence of which are you need to listen to me.

He spent his time talking about the world’s debt problems, but particularly the U.S.’s. By his reckoning, our ratio of debt:GDP is 350%, and we’re headed toward Japan’s 450%. Since 2000, the U.S. has added 100% to the ratio, while real household incomes are no higher; we’re getting less and less bang for the buck (of leverage.) While the smart people said how fortunate we were to have a Depression expert–in Ben Bernanke–on the job in 2008. Lacy says we needed the expert in 2000, before the debt ramped up.

His solution is austerity. He gave no quarter in a question about whether the Keynesians were right in stimulating the economy in 2008. Well, he conceded that the economy had to be saved, but everything they’ve done since then has been harmful.

With respect to investing, he said that in past periods of overindebtedness, bonds outperformed stocks for 20 years, and he wouldn’t be surprised to see the 20-year period extend longer, given our extreme overindebtedness; therefore, he remains bullish on bonds.

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