‘Stocks are for lovers, gold is for haters’

By Mark Yost
The Houston Business Journal

That’s the view of David Zervos, the chief market strategist for Jefferies Group LLC (NYSE: JEF), who was the keynote speaker at a March 25 meeting of the Houston chapter of the Financial Executives International.

Jefferies market strategist David Zervos.

Jefferies market strategist David Zervos.

Zervos has a somewhat unique view on the fact that the world’s major central banks have been printing money like crazy, raising central bank assets from $6 trillion in 2008 to $17 trillion today. While some people decry this easy-money policy, particularly at the U.S. Federal Reserve, Zervos called it “the greatest monetary policy experiment in history.”
Zervos, who himself has worked at the Fed, said Chairman Ben Bernanke pursued the policy that resulted in 2 percent inflation and pretty much zero interest rates on savings accounts to “send people into other assets” such as gold, equities and real estate, the three things in the world “that Fed can’t dilute.”
Zervos said the Fed policy of pushing money into the U.S. economy through quantitative easing came about from Bernanke’s study of the Great Depression.
Bernanke“What did people do in the 1930s?” Zervos asked the crowd of money, finance and oil and gas executives. “Deflation and the hoarding of cash gripped the U.S.”
Zervos argued that the Fed’s monetary policy of easy money — much decried by deficit hawks — is better than a repeat of the 1930s.
“We’re either going to land in the ’90s or ’70s,” Zervos said. “Not the 1930s and not Japan’s lost decade.”
The U.S. economic downturn in the 1970s resulted in something economists called Stagflation, a stagnant economy coupled with double-digit inflation. The 1990s had the tech bubble burst, but eventually resulted in some of the strongest year-over-year economic growth in U.S. history.
That’s where he gets his signature tag line: “Stocks are for lovers, gold is for haters.” Zervos is clearly a lover.
In short, he said that if you’re somewhat of a pessimist — a hater — and think the Fed’s monetary easing can’t go on forever, and the system is destined to crash, then you think we’re going back to the 1970s and want to be in hard commodities, such as gold. But if you think the U.S. economy is eventually going to emerge from this period of low growth and eventually recover, much like the 1990s, then you’re a lover and should be in equities.
Zervos doesn’t dismiss the potential pitfalls of printing money.
“We will have some side effects of this QE, our antidepressant,” he said. “But for whatever reason, our system fosters growth and innovation. The incentives for us to be greater have never been better.”

About Mark Yost
Mark Yost is the author of the Rick Crane Noir series, published by Stay Thirsty Press. Rick Crane is the classic, anti-hero private eye in the spirit of Sam Spade and Jim Rockford. He works in the unmistakably noirish underworld of Upstate New York, running errands and fixing problems for Jimmy Ricchiati Sr., one of Upstate New York's most notorious crime bosses. But readers quickly learn that deep down, Rick Crane is one of the good guys. "Cooper's Daughter," the first book in the widely acclaimed series, is a fast-moving tale in which a heartbroken father comes to Rick and asks him to find out what really happened to his daughter, who was murdered and the details buried in the Unsolved Crimes File of the local police department. The second book in the series is "Jimmy's Nephew," which begins with the death of Joey "Boom Boom" Bonadeo, an up-and-coming boxer and the nephew of Rick's underworld boss. What starts out as a routine investigation turns into a case that will test Rick's faith -- in the Catholic Church and his fellow man. Book No. 3 in the series, "Mary's Fate" is due out in August 2015. Mark Yost also writes for The Wall Street Journal Arts in Review page, as well as the Book Review section. He is a member of the Mystery Writers of America -- Midwest Chapter, International Thriller Writers, and a number of other author groups. He is also a member of the Amazon Author's Program. Mark lives in the Loyola neighborhood of Chicago, but he and his son, George, call the Bensonhurst section of Brooklyn "home."

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