Contrarian guru David Dreman says policymakers have created “a form of financial Ebola” that is threatening to wipe out the savings of many Americans.
Dreman says that, given how low the Fed has kept interest rates, a pick-up in inflation to 4% would be disastrous for savers. “Indeed, this strategy wiped out a good part of the financially conservative wealthy after World War II, as the dollar lost 92% of its purchasing power from 1945 to the present time,” he writes, adding that Fed policy is “crippling retirees”.
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Dreman says he thinks “a day of reckoning is coming,” one on which the US will need to “print and distribute possibly trillions of dollars in the next decade or two to compensate millions of Americans for the shockingly low levels their pension and retirement plans might fall to.” He says it’s as if policymakers have created “a form of financial Ebola, which, if not checked, will soon wipe out much of the savings of tens of millions of people in this country.”
Dreman says that buying a home with extremely low interest rates and 20% or 25% down “is the safest leverage play out there”. Aside from that, he likes value stocks, and offers a handful of picks he likes right now.
