Economic outlook from Paolo Pellegrini

From Bloomberg's Pellegrini 80% Return Proves Paulson Protege No Fluke at Fund:

Today, Pellegrini’s economic outlook for the next 5 to 10 years is a sobering one. He says the U.S. economy will groan under the weight of budget deficits, increased regulation and household debt. Europe will perform only slightly better, and Asian economic growth will outstrip that of the developed world. “There are going to be huge shifts in wealth around the globe,” he says. “I want to invest in that.”

Pellegrini says the U.S. stock market is likely to generate negative returns when adjusted for inflation. And the U.S. dollar will flag as an unrestrained Federal Reserve dispenses more money.

“In the U.S., there is limited interest among those in power in the stability of the dollar,” he says.

Meanwhile, the price of scarce commodities such as oil will surge as global competition for them heats up, Pellegrini says. Accordingly, he expects U.S. Treasuries to fall in price in the long term, and he’s buying oil futures. In September, he owned Norwegian kroner and said he believed the Australian dollar would benefit from that resource-rich country’s geographic proximity to Asia.

From Zero Hedge - John Paulson's ABX Oracle Paolo Pellegrini Discusses Anemic Real Stock Returns, Blasts Federal Reserve:

• Stay away from US fixed income asset: he is short USTs and Agencies
• Much more demand for commodities, specifically oil: "these are the real assets you want to be in"
• US Equities: "trend growth will be much less than in the past and that affects equity valuations" - there will be less efficiency, less activity, less real growth, which will affect stock valuation. "You will have anemic real returns on stocks."
• What should the Fed be doing? "We should focus on market based way of reducing household liabilities, basically restructure mortgages one by one and whoever made the mortgages should bear the brunt of the losses"
  
• "Long-term let's change the mission of the Federal Reserve: let's codify something that prevents it from running amok, like it did for the past ten years"

h/t Zero Hedge