Monday, October 25, 2010

Charles Githler, Toronto Money Show 2010

Charles Githler, Chairman and co-founder of Money Show was the next speaker I heard. He feels that stagflation can and will happen again. He thinks we will go from current deflation to inflation. The last time we had stagflation it was caused by US spending on “guns and butter”. This is reference to Vietnam War spending and big social spending in US. He thinks that the first round of quantitative easing (QE1) and the coming up second round of quantitative easing (QE2) will cause the next round of stagflation. In the 1970’s, the US went from .3% inflation to 7% inflation in one month. He did not think history repeats itself, but it rhymes.

Githler thinks that the current bond fund bubble will be killed by rising interest rates. Low interest rates will stop. However, he thinks that this time the US will be importing inflation from the developing markets. When interest rates rise, lots of people will be forced to sell bonds. This will make bonds illiquid, with everyone trying to sell bonds and no one wanting to buy them. This time, he does not think that inflation will go hyper, that that it will go to about 4%. The cheap labor of the developing countries will help to keep prices down.

Githler feels we are entering a period of global reflation. What we should be buying are companies like Brookfield Asset Management (TSX-BAM.A). Another good investment would be in resources, such as oil. Charley Maxwell, Senior Energy Analyst, Weeden & Co, says that we will have high peak oil in 2015 to 2019 time frame. So we should be buying Cenovus (TSX-CVE) or Suncor (TSX-SU). Canadian Oil is a great investment because Canada is such a stable country. Another great investment would be in Tech stocks.

The last thing he talked about was that it was important as investors, to limit our losses. He pointed out that if we lose 8% on our portfolio, we need only a 9% gain to get back to where we started. However, if we lose 15%, we need an 18% gain, if we lose 25%, we need a 33% gain, if we lose 35% we need a 54% gain and if we lose 45%, we need an 82% gain just to get even.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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