8 areas to invest in, 7 to avoid

Americans are in for another decade of slow growth, predicts Gary Shilling, president of economic consultant firm A. Gary Shilling & Co. Inc.

And there are a number of contributing factors, including a deleveraging cycle that will last five more years.

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“Normally after a financial crisis it takes about ten years [to recover],” says Shilling, who spoke at the Ben Graham Centre’s 2013 Value Investing Conference in Toronto in April. “It started in 2008, so I would say it will take roughly another five years for this process to be completed.”

He adds 2% real GDP growth will continue for the remainder of the deleveraging cycle, and this number is comparable worldwide — it’s not specific to the U.S.

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Adding to slow growth is a decrease in the export of goods due to a shaky global economy. As a result, the U.S. has no one to trade with, says Shilling. To cope, governments have lowered prices to make exports more attractive.

So in this changing world, where should investors park their money?

Not in commodities, says Shilling, because prices are deflated. With low interest rates, investors want more yield and aren’t afraid of risk, he adds.

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Shilling lists the following as attractive investments for the long run:

• Treasuries and high quality bonds
• Income-producing securities
• Food and other consumer staples
• Small luxuries
• The U.S. dollar
• Rental apartments
• Healthcare
• North American energy

On the flipside, he lists investments to sell or avoid:

• Big ticket consumer purchases
• Credit cards and other consumer lenders
• Conventional home builders and suppliers
• Selected banks and similar financial institutions
• Junk securities
• Commodities
• Developing country stocks and bonds