|Spotlight: Consuelo Mack
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there a risk that all of this new "liquidity" that's
making its way into the financial markets might, in
the future, trigger rising inflation at a time of
economic contraction, causing stagflation?
Yes, we are definitely risking that. But it's my feeling that we have to get our priorities straight. Right now the priority is just to provide the needed liquidity so that businesses have the capital they need to make their payrolls. This has literally got to be the first priority.
We are also in a deflationary environment
and certain important assets like stocks, bonds and
housing are in need of stabilization. The price for
that will be inflation down the road, but we're about
two to three years away from that. The private economy
and the supply of money in the private economy is
shrinking, whereas the public money supply from the
Fed is expanding. So this might not in fact be a situation
that is as inflationary as some fear it to be.
What advice do you have for small investors who have seen their IRAs, 401(k)s, 403(b)s, Roth IRAs and taxable investment portfolios so terribly pummeled?
shouldn't be freaked out. Yes, we are in a bear market,
and you should be aware of that and invest accordingly,
remembering always that stock investments are a long-term
investment. Dollar-cost averaging is definitely the
best way to invest money right now, and you should
not forget about the tremendous power of compounding
All of the guests on my show have reiterated
that when a place like Macy's has a shoe sale, you
want to be a buyer at that time. This current market
situation is like that Macy's shoe sale: It's the
stock-sale of a generation. So keep doing your dividend
reinvestment programs, keep on dollar-cost-averaging,
and keep investing in increments. Two to three years
from now, you'll be glad that you did or wished you
Is the U.S. the best place in which to invest the bulk of your nest egg, or should people be more open to placing a bigger percentage of money in foreign and emerging markets?
still believe the U.S. is the best place in which
to invest your money, but it's no longer the only
place. I firmly believe in broad diversification overseas.
Emerging markets are probably where the fastest growth
is right now and selectively they are in much better
shape because they have already gone through a contraction
back in the 1980s and the 1990s. In a global economy,
I believe that you should at least have the market
weight representation in your portfolio and having
something like 40 percent of your portfolio invested
in foreign stocks and bonds.