More Cheer From Bridgewater

I have written several times on this blog about the gloom and doom for the US that is predicted by a firm in Hong Kong called Bridgewater. Usually it is Stephen Gollop who comes on CNBC Asia but yesterday it was a chap named Martin Hennecke.

The bear/apocalypse case always sound more compelling and intellectual. Included in yesterday's interview was the word apocalypse. Show host Mark Laudi used the word twice, kind of tongue in cheek I thought, but Mr. Hennecke never tried to bring the reins on that one.

He had a couple of interesting nuggets of information that are worth knowing. He said that 63 units of debt need to be created to create one unit of GDP growth, this is dangerously high. The word unit was not defined.

He also said that the way inflation is calculated by the US government understates the problem and that GDP growth is actually negative when inflation is accounted for properly. Again no tangible numbers but this is clearly his belief.

He also expressed concern about the debt situation in the US being similar to various "banana republics" that fell. He said debt is worse now than it was in 1929.

Despite the lack of data for the interview I do not doubt that they believe in this I also do not doubt they have data to support all of this. Data can be mined to say anything, afterall.

That too much debt is bad and could result in a horrible outcome is not impossible. This concern has been on the plate of the US economy for years. I never hear anything different about why it matters more right now to trigger a financial apocalypse and why not ten years from now?

The folks at Bridgewater have been predicting these things for several years, at least, but I don't think I hear any sort of change in their thought process that makes now more probable than two years ago.

Mr. Hennecke did talk about preparing now for when the inevitable comes. I can buy into that. Have some sort of counter strategy and exit strategy.

If some sort of financial apocalypse does come it will happen slowly giving plenty of time to get out. Long term investors don't need to top-tick the market. Taking steps to miss big chunks of down a lot (recurring theme), no matter what the cause, is what's important. If you lose 10%-15% while the market is cutting in half how would you feel? You'd feel pretty good about things.

I personally don't believe we will have a financial and economic apocalypse. I'm thinking 2006 will not be great but that does not equate to Armageddon.