The Days of “Buy and Hold” Are Over, says John Mauldin

The economy is still the pits yet stocks are on a tear. What’s an investor to do in these confusing times?John Mauldin, president of Millennium Wave Advisors, admits the average investor doesn’t “have as many good choices” as in the past.Contrary to what “experts” have told the public for years, now is not the time for buy and hold, Mauldin says. “You can be a trader. You can ride the wave, I’ve got no problem with that but I don’t think you want to buy something and hold it for five years.”That’s because he thinks another correction is coming in the not so distant future.Mauldin, who writes the Thoughts from the Frontline e-letter, does think there’s money to be made in real estate. With prices so depressed in many markets, he says buying property on the cheap and renting it “is a prescription for making money.”

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John Mauldin Tax Hikes Will Kill the Recovery Which Isn’t Real Anyway

The economic recovery currently underway is a statistical mirage, based on easy year-over-year comparisons and inventory rebuilding, John Mauldin, president of Millennium Wave Securities, tells Henry in the accompanying video.The unemployment rate is closer to 12% when you include people who’ve been dropped from the survey and the “underemployment” rate – people working part-time vs. full time – is 17% to 18%, “and rising,” Mauldin says. “That doesn’t feel like recovery.”Mauldin, who writes the popular Thoughts from the Frontline e-letter, predicts the U.S. economy will be back in recession next year because of higher taxes, both new and with the expiration of the Bush tax cuts.”The Obama administration [and] the Democrats aren’t going to be able to help themselves,” he says. “The deficits are going to be running so high they’ll feel – politically — the need to do something. The way they want to solve it — instead of cutting spending is to increase the revenue. That’s going to suck a lot of air out of the room.”As for the long-term, Mauldin worries America could repeat Japan’s experience of a lost decade (or two), if not the Great Depression itself, citing the risk of policy errors such as trying to solve a debt crisis by issuing more debt.

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Why Our Massive Debt Will Kill Us in the End

Now that the worst of the recession is over, Americans are waking up to the fact that we’re borrowing nearly $1.5 trillion per year. Instinctively, this worries us.But why?What’s really so bad about piling on debt in excess of 10% of GDP every year?Japan has been borrowing through the nose for years, and Japan, well… okay, maybe Japan’s not a good example. Japan’s economy has been in the tank for two decades.Actually, Japan’s a great example, says John Mauldin of Millennium Wave Advisors. What’s happened in Japan in the past 20 years is that government borrowing has largely replaced private sector borrowing: The total debt hasn’t risen, but the government’s percentage of it has soared.Unlike private-sector borrowing, which is (usually) productive, government borrowing doesn’t stimulate growth, Mauldin says. This may be at least part of what’s ailing Japan. And as long as we rely on the government to borrow and spend for us, the same thing could happen here. Our economy could become dominated by a huge, inefficient bureaucracy instead of lean, competitive private-sector companies.And that’s the good outcome. The bad outcome is that China and other countries finally get sick of lending us money at rock-bottom interest rates and start demanding real compensation. If that happens, interest rates could soar, stopping the economy in its tracks.

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