TO BE A SUCCESSFUL investor during the remainder of this decade, you must recognize the nature of the times we are in. The U.S. economy will be in muddle-through mode for some time, and much of the developed world will be struggling to cope with an overhang of too much debt and a general deleveraging in both the private and public sectors. The stock market still trades at valuations that are higher than trend, interest rates have nowhere to go but up, and the twin deficits of trade imbalance and government debt stare us in the face. We face a long-term secular bear market as stock valuations drift toward lower levels.
In spite of the problems, we need to keep in mind a central fact: The U.S. economy will continue to grow. Throughout this book, I’ve stressed that the investment opportunities have changed from the ones you pursued over the previous three decades, but opportunities do exist.
To use another hunting analogy, it is no longer deer season. It is time to hunt for something else and maybe even to hunt in a different place altogether, with different types of weapons and gear. The basics will be the same. We are still hunting and will bring home our trophies—in this case, it will be profits. We will just get them from a different source than we did last season.
It is an era of emphasizing absolute returns over relative returns. It is a period in which research and homework will be rewarded and blind trust in an ever ...