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Vanguard experts warn of economic dangers of US ‘fiscal cliff’
The Royal Gazette ^ | May 18, 2012 | Jonathan Kent

Posted on 05/18/2012 6:11:39 PM PDT by SteelToe

Global economic recovery will be slow and bumpy over the coming years, a senior economist from Vanguard told financial services professionals in Hamilton yesterday.

Speaking at the Vanguard 2012 Bermuda Investment Forum at the Fairmont Hamilton Princess, Roger Aligia-Diaz highlighted several headwinds facing the economy including the European sovereign debt crisis, high oil prices, a slowdown in China and the “fiscal cliff” facing the US at the end of this year.

Although Mr Aligia-Diaz warned his audience that his message might appear depressing, the presentation was cautiously optimistic, indicating that growth was happening and was likely to continue.

Vanguard, which manages more than $2 trillion of assets in its mutual funds, sees the most likely scenario for stocks over the next ten years as an annualised return of between six and 12 percent, the same applying to the US and emerging markets.

It sees prices remaining stable with annual inflation most likely to be in the two percent to three percent range over the next decade. This will likely be accompanied by a very low-yield bonds environment and Vanguard sees the most likely return average US bond yield as being between 1.5 percent and 2.5 percent.

In a question-and-answer session, Mr Aligia-Diaz described the seriousness of the situation facing the US at the end of this year, known as the “fiscal cliff” or ‘taxmageddon”, which he described as a political risk, rather than an economic one.

“This refers to tax increases and spending cuts that will take place automatically at December 31, unless the US Congress acts before then,” Mr Aligia-Diaz said. “This would probably have to happen after the elections in November.

“If nothing is done, then it will effectively mean $600 billion of austerity put into the fiscal budget. That would certainly put the US into negative territory for GDP growth in the first quarter of next year.

“Most people think that the Congress will be able to extend the payroll tax breaks and the Bush tax cuts, and make fewer spending cuts. They will also have to work out a new debt ceiling deal at the same time.”

Jack Brennan, chairman emeritus and senior adviser of Vanguard, then spoke of some of the lessons he had learned in his 30 years in the investment industry.

He remembered the widespread pessimism when he had first started in 1982 at the tail end of what was then the deepest recession since the Great Depression. yet it turned out to be the start of an 18-year bull market.

His experience had taught him that it was very difficult to answer the regular investor’s question: “Is this a good time to invest?”

What he had learned was that there were three basic building blocks necessary for successful investing. First, an appreciation that costs matter, that even a small difference in fund fees can make a huge difference to wealth accumulation in the long term.

Secondly, the value of diversification. “The thing about diversification is that it’s guaranteed to disappoint, because some assets will not perform,” Mr Brennan said. But there was solid evidence that over time, diversification paid off. This was easier to achieve in these days of exchange-traded funds (ETFs) that followed multiple indices, he added.

Thirdly, he said it was important to be able to define the intended duration of the investment. Defining “long term” was very challenging and could make a significant difference to returns. For example over the past ten years stocks have returned about 5.5 percent compounded, he said. But over the past 30 years, there was an 11 percent return.

Other key elements included avoiding bad ideas and investment fads, remembering that ‘conservatism wins’, understanding risk, paying attention only to your own personal benchmark and trust of the people you invest with.

Mr Brennan also had some encouraging words for Bermuda, when he touched on the importance of regulation.

“You have a great business environment in Bermuda, because you’ve got the regulation right,” he said. “Bermuda could be a role model for getting regulation right. If you don’t get regulation right, then people lose confidence in the market and they don’t invest, and growth slows because markets drive growth.”


TOPICS: Business/Economy; News/Current Events
KEYWORDS: austerity; economy; fiscal; obam; obama
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Comment #21 Removed by Moderator

To: SteelToe
"He remembered the widespread pessimism when he had first started in 1982 at the tail end of what was then the deepest recession since the Great Depression. yet it turned out to be the start of an 18-year bull market. "

He fails to mention that in 1982 we didn't have the enormous UNPAYABLE debt that we have now.

22 posted on 05/27/2012 9:59:15 AM PDT by blam
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To: ex-Texan
The same crowd is running the same domestic & international debt show, but when she crashes the next time September 2008 will appear mild in retrospect.


23 posted on 05/28/2012 4:03:11 AM PDT by M. Espinola (Freedom is never 'free'.)
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To: M. Espinola; Brilliant; Quix; Alamo-Girl; whitedog57; stephenjohnbanker; blam; All
A Must Listen to This ! Banksters Bevealed

New World Order Agenda

Show Audio

ttp://www.youtube.com/watch?v=xyRQ_Ym4gTw&list=PL38390ED8460039CA&index=1&feature=plpp_video

Date: 05-27-12
Host: George Knapp
Guests: Jim Marrs

New World Order Agenda:

On Sunday night's program, George Knapp was joined by investigative journalist, Jim Marrs, who appeared for the full four hours and discussed his research into the elite's agenda for enslaving the human race. He dismissed concerns over being derisively labeled a "conspiracy theorist," because, in hindsight, "it turns out that everything, generally, that I have presented has always proved to be true." On a grand scale, Marrs contended that "off the shelf" technology exists to feed, house, and medically treat everyone on the planet, but it is not put to use because, "somewhere, somebody wants it that way." This purposeful neglect, he said, is "the biggest proof not only of conspiracy but the biggest conspiracy going on right now."

"We're talking about a very, very small handful of people connected to bloodline families that go all the way back through history," he said about the powerful global elite, lamenting that "these people think they have the right to run the world." In light of that belief, Marrs observed that their leadership has led to widespread debt, "unending warfare," an emerging police state, and a myriad of other problems facing the human race. He claimed that the increasing amount of polarization amongst the population is orchestrated to "divide and conquer" the human race and prevent people from uniting against the overarching agenda at work against them. "If we'd simply wise up and start banding together," he suggested, "then I really do believe that we can overcome this scourge that has been put upon us." Ultimately, Marrs warned that rampant pollution, the proliferation of pharmaceutical drugs, and tinkering with the food supply are all part of a larger agenda aimed at reducing the world's population. "They want us dead," he declared, "this isn't about which political system works best, this is about self defense and survival." On why the powerful elite would want to cull the human race, Marrs theorized that there may, in fact, be a connection to the UFO phenomenon, which appears to stretch as far back in human history as the bloodlines of these power brokers.

http:jimmarrs.com

Book(s):

The Trillion-Dollar Conspiracy
The Terror Conspiracy: Deception, 9/11 and the Loss of Liberty
Rule by Secrecy

24 posted on 05/28/2012 11:00:42 AM PDT by ex-Texan (Ecclesiastes 5:10 - 20)
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To: M. Espinola; Brilliant; Quix; Alamo-Girl; whitedog57; stephenjohnbanker; blam; All
Insiders Report: Obama Activates CIA Hit Teams to Kill Americans and Blame Iranians!
25 posted on 05/29/2012 10:24:33 PM PDT by ex-Texan (Ecclesiastes 5:10 - 20)
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