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Doug Kass predicts uneven growth, John Browne looks to gold


Two years ago, the Palm Beach Business Group invited Doug Kass and John Browne to be guest speakers at the group's Bear vs. Bull debate. On Friday, the same duo addressed the business group's breakfast meeting at the Palm Beach Steakhouse. True to their differing points of view, their comments were thought provoking and didn't disappoint.

That said, if you expected to walk away from the meeting with a clear-cut sense of America's economic future and specifics about how to invest, you're probably still wondering. Then again, with U.S. and world market conditions as volatile and murky as they are today, finding consensus or a clear-cut anything isn't really possible.

Kass and Browne are well-known market mavens and live locally. Kass is a columnist, market commentator and money manager. Browne also writes, is a senior economic consultant for Euro Pacific Capital and is recognized for his commentary and global economic perspectives. Together, the two kept this morning audience of 65 awake and entertained.

In a nutshell, Kass is the more bullish of the two -- even though he said it's likely to take until the end of the decade for the U.S. to see unemployment in that mid-6-ish percent arena and economic growth returning to pre- recession levels.

Regarding the market: "I don't think that we'll ever see 666 on the S&P 500 again in our life," Kass said referring to that index's devilish close on March 6, 2009.

Browne, on the other hand, disagrees. "Rather than seeing great things ahead for markets and never seeing 666 again, I think in three years time you'll be lucky to have seen 666."

Where does that leave investors? Browne suggests investors get out of any real assets and into cash. The cash he is speaking of however, aren't greenbacks but gold.

"Gold is always a hedge against inflation. But it is also an insurance against catastrophes. "And from his point of view, there are plenty of catastrophes on the horizon whether in Europe, with the euro or in the U.S.

For those who might think gold is a bit too pricey these days, Browne said at its current price (inflation-adjusted), it is basically about 70 percent of what its value was in the 1980s. "Gold is only 70 percent of its original high and still has 30 percent to go before it reaches its 1985 high of $860, which is $2,400 today."

Kass: Diversify

Kass, on the other hand, thinks investors need to create diversified portfolios -- and, yes, to even include precious metals such as gold in them. Additionally, he suggests investing in dividend-paying stocks specifically when the dividend yield is higher than the company's bond yields. That means looking for yields higher than 4 percent, or, higher than the yield on quality long-term bonds.

"Most economists have finally accepted my long-term view that forward economic growth will be sub-par and that the trajectory of growth will be uneven," he said.

Add that to the market's volatility, due in part to economic concerns, high frequency trading, the euro, China and almost anything else one can think of -- all of which will no doubt continue -- and navigating the markets will continue to be tough going forward for individuals and money managers. Even so, Kass admits he is more of a bull these days than he is a bear.

Browne: Health

Not so for Browne.

When he looks at Europe, he refers to "bankers" as "banksters" and sees the future in that world as one in which German is primary language. On the U.S. home front, he is no fan of the government or the future value of the U.S. dollar.

But to make it through the tough times ahead, Browne's advice is simple: "First you've got to realize that your greatest wealth is in your health. Health problems can cripple most savings and retirement funds. And second is to be prepared."

Both men agreed the current political climate in Washington isn't serving investors well and that solutions to the myriad problems facing us, including our huge debt and deficit problems, will take time.

As varied as the speakers' points of view were, so too were those from the audience. Jeremy Wiesen, of BizStart.com, thought the program was great with one omission: "Something they left out was how much of a high-tech era we really are in."

Wiesen says he thinks the country is in a hyper-high tech era, the kind that drove the computer industry in the 1980s and the Internet in the '90s. He sees that as a bullish scenario.

George Psoinos, a local attorney, found the program a bit confusing for "people who are still on the fence about what to do and which way to go."

Which brings us back to that tunnel and what's at the end of it: Kass sees a light. Browne, "I see a fire."

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