Saturday, February 24, 2018

Roubini Sidekick Likes Dividend Stocks and Corporate Bonds.

March 20, 2010 by  
Filed under Inflation Hedge Strategies

While “Deflation is a very serious risk, inflation is a greater likelihood,” according to Arun Motianey, director of fixed income strategy at Nouriel Roubini’s (Dr. Doom) RBG Capital. Motianey has been promoting his new book SuperCycles: The New Economic Force Transforming Global Markets and Investment Strategy.

In an interview with Tech Tickers Aaron Task, on March 3, 2010 Motianey said that he was expecting the Central Banks of the world to “see the light to embrace inflation”. Motianey explained that he is anticipating “a period of voluntary inflation, rather than involuntary inflation.” He said if the they do what he’s recommending “we can expect to see the Fed monetize public sector deficits.” In other words, the Fed will print money to buy treasuries.

“When the economy starts to pick up and you allow some inflation to come in, then the equity markets will start to respond, because generally equity markets like inflation. And so there will be a demand for credit, because you can see that profits will start to expand, and not just in cost cutting way, but actually in top line way.”

Motianey continued, “The central banks should not try to pull back those reserves”. He acknowledged that “There is a risk that you can lose control of that kind of inflation. Of course the way you get back is by declaring another kind of monetary standard, like the gold standard.”

Asked “Where should you be putting your money”, Montianey replied, “Stay in corporate bonds (as opposed to so called risk free treasuries) because they are a kind of quasi equities. Be in equities, and narrowly in equities – – be in natural resource commodity linked basic materials and so on.

Montianey also likes dividend stocks, suggesting that dividend yields are still very low. He predicts that “dividend yields will begin to rise and they will replace bonds as an income generating investment.” Not surprisingly, Montianey will also think that gold perform “extremely well”.

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