The chickens of irresponsibility are coming home to roost

Interesting read. Excerpts from Dr. Enzio von Pfeil's November 18, 2008, appearance on CNBC Asia, Worldwide Exchange(SeekingAlpha.com):

Asian economies are in technical recession - how does that impact your investment strategy and asset allocation?

Investors have discounted this mess for the past six months.
Thus, I have no major changes to my investment strategy/asset allocation.

What are some investment themes up to the first half of 2009?

The next bubbles that have to burst are:
Long-dated bonds, on account of the rising US and other budget deficits, and
The dollar itself.

Which markets and sectors do you especially like?

No markets, as the global Economic Time™ is virtually the same everywhere: the chickens of irresponsibility are coming home to roost. If one must be in markets, then invest in “vital” sectors like consumer staples, food, healthcare. At least, they won’t get hurt as much because people still have to have these products and services.

Current earnings so far - what's your outlook going forward?

Earnings will go down even more. The Economic Clock™ is clanging for:
Excess demand for money, and
Excess supply of goods.

Under such a scenario, it is impossible for corporate earnings to improve. Indeed, “layoffs” news has just reached our shores in Hong Kong. This implies that neither turnover nor margins can rise.

Is there anything else you may want to highlight?

Obama’s influence on China and vice versa. It seems like Obama will have to go protectionist, as many of his voters expect this. Meanwhile, Chinese officials will start taking their wrath out on the local operations of U.S. multinationals – something which my most recent book, Trade Myths: Globalization and the Trade Balance Fallacy, warns of.

Bond blow out.

Seems like markets are not quite aware of the extent of public debt that is being created now that the chickens of irresponsibility have come home to roost.

Cost push stagflation.

We have been bleating on about this since Spring 2006, so at some point this will occur. This will hit particularly those countries/areas whose currencies have fallen the most against the US dollar, e.g. Euroland (rapidly morphing into Neuroland).

* Fuel prices down for the 5th time: Now Ron 97 is RM2 per litre(from RM2.15), Ron 92 and Diesel RM1.90 (from RM2.05). Wonder what will be the outcome if our government were cool headed then and did not raise the fuel price drastically a few months ago?

* Taiwan is to liberalise casinos operation as it is set to allow permits by year end for 3 resort casinos to shore up its economy. The resort casinos will be located in Penghu island.

* BT: CIMB Aviva has offered a voluntary layoff scheme to its permanent employees, one of the earliest to do so since the economic slowdown in Malaysia this year.

: Bloomberg: Jerry Yang-Yahoo's co founder and CEO to step down soon. A true gentleman indeed!