The Investment U E-Letter: Issue # 457
Monday, August 1, 2005 Martin Barnes: His 10-year Investment Return Forecast
By Dr. Steve Sjuggerud, Chairman, Investment U
"Stocks may get 5% or 6%, and bonds may get 4%, and cash will get 3% returns. Those are the returns I see in the next decade, on average… It's not the end of the world, but it's nothing like what people got used to in the last 20 years."
~ Martin Barnes of BCA Research, in this week's Barron's magazine People often ask me, "Steve, how did you learn so much about successful investing so quickly?" I get that question a lot. And my answer is, I cheated… I simply found out who all the great investors were throughout history, and I tried to learn exactly how they did it, as best I could. Learning from the best (via books, or in person) was a much better education than what I learned in school (and I went as far as you can go in school). I still continue to try to learn from the best. The search never ends (for example, we shared with you some of our talk with Jim Rogers last week in Investment U - Part 1 & Part 2). There are great investors in the past. And then there are great investors today, who also share their insights with us… Guys like Warren Buffett, through his annual shareholder letters (at http://www.berkshirehathaway.com) and guys like Bill Gross, who manages more money than anyone in the world, through his monthly letter at http://www.pimco.com. And then there are guys like Martin Barnes… Martin is the man behind BCA Research. I've followed his stuff for over a decade. His analysis is always well researched and sensible. Barron's interviewed Mr. Barnes over the weekend. Let's see where he stands on the big issues of today… Martin Barnes on Investment Returns Going Forward… "The journey toward low inflation from high inflation gave us the great returns, and now that we are at the destination, it is not half as much fun… A balanced portfolio could get 5%, maybe - a portfolio of 60% stocks, 30% bonds and 10% cash could give you those kinds of numbers…" Barnes on Oil… "Even oil at the $40 to $45 level is quite a high price compared to what people might have expected a few years ago. It is a high enough price that oil companies would still make a lot of money. It will still make energy a good sector to invest in. It is certainly one of our favorite sectors from a long-term structural point of view." Barnes on Housing Prices… "Down the road, there is a U.S. consumer recession lurking and a big housing downturn. It could be five years down the road…." Barnes on the Dollar… "[Strength in the dollar] is sustainable for as long as the Fed is tightening and the U.S. economy is perceived to be strong… The dollar should have a relatively firm year this year, barring some unexpected shock." Barnes on Inflation… "Inflation is going to be low for the foreseeable future… We've had the perfect inflationary mix, and yet we haven't really had any inflation despite that. If you look around the world, there's no evidence of inflation at all." Barnes on Alan Greenspan Raising Interest Rates… "Money is not as tight as it seems… Bank lending is growing at double-digit rates. House prices are through the roof. There is money available for deals. None of these trends are consistent with tight money. Money policy is not yet restrictive." So… Martin Barnes thinks that investment returns in general won't be great for the next decade… that oil companies could make a lot of money from here… that a housing downturn is inevitable someday… and that money is still easy to come by, regardless of the Federal Reserve hiking rates. With Mr. Barnes's track record, that's as good a forecast as you'll find for the next 10 years. If you really want to succeed as an investor - and become a great investor yourself - the best thing you can do is to learn from guys like Martin Barnes… to learn from the great analysts and investors, past and present. It takes a bit of effort. But it's definitely worked for me… and it will work for you, too. Today's IU Cribsheet - I thumb through Barron's magazine every week. The most useful part of Barron's to me is the interviews with the greats. This interview with Martin Barnes is in the current issue. Martin concludes the interview with his favorite picks, so if you'd like to get them, pick up a copy of Barron's. To learn more about Martin Barnes's company, visit http://www.bcaresearch.com.
- To read more interviews with the greats, you can pick up most any book by Jack Schwager (like Market Wizards) or John Train (like Money Masters of Our Time). You really can't go wrong. Another good thing to do is read books by the greats themselves. Two recent good ones are The Mind of Wall Street by Leon Levy, and Adventure Capitalist by Jim Rogers.
Good investing, Steve Related Articles: Return to Archives
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