The Buying Opportunity of Our Generation

Posted by Robert Zurrer for

Share on Facebook

Tweet on Twitter

Danielle Park is a fire breathing market enthusiast. The President and Portfolio Manager of Venable Park Investment Counsel Inc., Danielle has the alphabet soup of accreditations that your typical fire breather has, LL.B., CFP, CFA on top of her duties as Partner, Portfolio Manager.

I can say one thing about Danielle, she sure knows how to articulate a critical market scenario in a way that compelled me to grab a phone to make a couple of moves in sympathy with her view that “Interest rates have never been lower. So, if you have debt, lock and load and get that paid off, use this opportunity to become debt free”
No kidding. Yesterday  (Sept. 6th) the 1 year Greece bond hits 88%. Now if you  juxtapose that with the United States 10 year Treasury bond at the same time touching the lowest EVER at 1.90 percent you really have to take Danielle’s advice seriously. Especially when you consider that the United States is happily teetering on the brink of economic suicide spending 3.456 Trillion on revenues of 2.162 Trillion. No wonder Obama doesn’t want to submit a budget, it would be the suicide letter.
Good call Danielle, hard to imagine a more brilliant time to focus on paying down high interest rate debt when our historically low interest rates are 2 percentage points above negative interest rates and 1.9% above zero. But that’s not all Danielle had to offer….
Danielle thinks that there are basically two groups of people. One is the accumulation group. folks that are still working and saving to amass capital.

“Then there is the other group which have already accumulated and they are trying to live off the stuff they’ve stored in the cupboard. So, the people that are trying to live off right now have a really hard goal because they cannot in my view take blind reckless risks with their capital regardless of what the politicians are trying to incent them to do. I think if we’ve learnt anything in this time, we’ve learned that the individual cannot put blind face in government politicians or federal bankers’ right? Bankers in general have led us astray, caused much of this problem and still have not got it. So, you have to deal with the reality of that and say okay, I have to look out for myself. Most financial advisors today are utterly useless in this climate. The learners will inherit the world here right? The learners are the people that understand there is huge seismic shifts going on and that you have to calibrate your approach for that, not some textbook idea of stuff that hasn’t applied for over a decade now. So, the buy and hold crowd, the passive allocators, that plough past the inequities and hope for the best, all that is rubbish. It’s hurt people, and it will continue to hurt people. For the people that get that, if you are in the accumulation stage here, what you need to do in my view is keep some powder dry.?

Powder Dry. Got it Danielle, another good reason to refinance that high interest rate debt.
Stresses in the Markets
Danielle’s team has done  overlays on the patterns that have developed lately in the markets in terms of the valuations price, relative strengths and the main trends that have taken place. When compared with the Japanese experience, the deflationary cycle and the major inflection points that they’ve had for the last 30 years she sees that in the North American and Global Stock Markets began a Secular Bear Market in the late 90’s. More importantly, while Danielle thinks the jury is still out she interprets the current market action as setting up for another huge downdraft like the one that swept through the markets in 2008-2009.
The good news
The good news is that despite all of the economic malaise going on in the world right now she’s “Actually fairly excited because we are basically setting up for the next buying opportunity in the secular bear. In our newsletter to clients this month, we were pointing out that every major secular bear that we’ve seen throughout history has a series of three significant down turns in the midst of three major recessions during that secular period. A secular period may be 15 to 20 years and during that, we got three severe sort of recessions that came roughly every three or four years in there. Well, if we are entering recession right now Victor, this could be the third and possibly final recession of this secular bear. For somebody who’s been dealing with this eyes wide open since the late 90s when we anticipated likely changing and from secular bull to secular bear. That we are going to be having these really challenging conditions to work through for that long a period. I’m personally excited to think that we might actually be getting to the end of this period where there’s been so much monkey business, so much baloney, so many unwise people leading the thing. If we can actually get a washout here, a third washout, it could potentially be the buying opportunity of our generation. That to me is extremely exciting.”
Getting from Here to There
Danielle thinks that we have had a credit boom for the last 30 years in Real Estate, Commodities, the Nasdaq Internet Boom when leverage between borrowers and lenders just got bigger and bigger. She’s a big fan of Gary Shilling’s “The Age of Deleveraging” whose essential argument is that we are going to go through a number of years of paying down debt, gearing back that will be countered by Government and Central Banks. The old I’m from the government and here to help you spending /bailouts of the Obama administration comes to mind. The leveraging also took root in the corporate world as CEO pay rose to 300 times the average worker during this period. We can’t forget either the wizards of leveraging at the Goldman Sachs of the world “when individuals were rewarded  handsomely for that magic stuff but now we realize that in fact that the added leveraging stir is not a magical potion, it is actually a very destructive force in the world eventually because it’s always taken to extremes. Credit derivatives extended the leverage, allowed leverage on planet earth to go into the universe.”. Danielle thinks all of that is now in the decline phase and that it is all very healthy.
Time Frame
In Danielle’s view the leveraging started into the stratosphere with the US housing market bubble that burst in roughly 2006. She thinks we started into the end game of the entire credit bubble at that time because “what happened was instead of letting that play it’s course the governments tried to intervene, which is typical by the way. Governments are not any dumber or smarter today than they have been throughout history, they are just people trying to do something because they are in a position of power and leadership and they are expected to do something. So they have tried to do things but what they’ve really done is depreciate the strength of the balance sheet, the fiscal strength over the last few years. So I think this phase when the crisis is coming back into bloom we’ll probably see a decline something like we saw in ’08.  Really fast and furious, it could be within six months from now where we’re significantly lower. I am saying the buying opportunity possibly could come within the next three to six months on things like stocks and commodities. If it goes sort of rapid fire”
Danielle Park has my attention. – Rob Zurrer for
Danielle Park is a Partner and Portfolio Manager for Venable Park Investment Counsel Inc.  She is also an attorney, finance author a regular guest on North American media and the author of the best selling myth-busting book “Juggling Dynamite: An insider’s wisdom on money management, markets and wealth that lasts,” as well as a popular daily financial blog:
Danielle worked as an attorney until 1997 when she was recruited to work for an international securities firm.  Becoming a Chartered Financial Analyst (CFA), she now helps to manage many million dollar accounts for more than 200 of North America’s wealthiest families as a Portfolio Manager and analyst at the independent investment counsel firm she co-founded Venable Park Investment Counsel Inc.  In recent years Danielle has been writing, speaking  and educating industry professionals as well as investors on the risks and realities of investment behaviors.