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.

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.

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 Moneytalks.net