Investing risk of debt and inflation

Are we going to have a replay of 1970s-style stagflation? Advisor Stephen Leeb thinks so, according to a recent email I got from him.

For those of you who don't remember, during much of the 1970s the econony did something it's not supposed to -- it had high inflation and high unemployment at the same time. The stock market basically went nowhere. Commodities and real estate greatly rose in price. The whole "get rich quick in real estate" concept began during that period. All but the youngest real estate gurus got their start during that decade.

But personally I think the investing risk of stagflation is low. A lot of those problems are traceable back to the coming of age of the baby boomers. A whole lot of 20 somethings looking for work. That created the high unemployment rate.

I am not going to argue with Mr. Leeb, however, that inflation remains a threat. The decline of the dollar and the rise in the price of oil are both problems for American residents.

Also, I highly agree that there's way too much debt for the good of the American and world economy. Federal government debt could be lower, but business and personal debt is a lot higher.

In case you're wondering, Mr. Leeb believes that the market is going up in the short run. He says the smart money, including Warren Buffett, is buying.

Of course, it's always smart to buy good companies with a long record of paying dividends.


investing risk
investing risk