Joe Battipaglia: Reliance on Debt Has Reached the Breaking Point

By on August 29, 2010

In a Forbes interview, strategist Joseph Battipaglia believes we will be in a disinflationary environment for years due to the debt that has accumulated throughout the world economy.

When you look at the OECD (Organization for Economic Co-operation and Development) figures on the total global liability and indebtedness you see that it’s at $230 trillion. And you recognize the annual GDP for the globe right now is something about $65 trillion. So effectively you’re running at three times or more the size of the debt relative to the economy underneath it, which means that the economies underneath it have a tougher time servicing the debt, paying off the previous debt and have a limited attractiveness as far as raising even more debt.

In this environment Battipaglia suggests bonds:

we’re recommending to investors in this environment is for the bond investor to ladder a corporate bond portfolio of investment-grade bonds, 30 issues, three a year over a 10-year period of time.

Battipaglia also feels that gold and globally focused large cap value stocks will provide relatively good returns. As for specific names Battipaglia provided the following:

a couple of names that fit the bill that we own currently include Pepsi (PEP), Exxon Mobil (XOM) and Cisco Systems (CSCO). Now Exxon Mobil and PepsiCo also offer the investor a dividend yield that’s comparable to what you get on Treasuries–which typically is a good sign for a stock relative to a Treasury.

Source: Forbes
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