The world’s largest investor says negative rates are breeding a disaster for the economy

Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future. People need to invest more today to achieve their desired annual retirement income in the future. This reality has profound implications for economic growth: consumers saving for retirement need to reduce spending if they are going to reach their retirement income goals and retirees with lower incomes will need to cut consumption as well.

I have said it before and I will say it again. The FED has pushed the envelope to such an extent that I cannot see how we can get out of this unscathed. To say the least. Today’s environment is equivalent to a dying patient being pumped full of drugs just to stay alive for a few minutes more. Yet, the final outcome is now a foregone conclusion.

How bad a slowdown do you need for a real wake-up call?

It’s hard to figure out exactly what the Sputnik moment will be, but it will come from one of three areas.

One is a market accident. This notion that suddenly there is an instability and you get very large moves in financial markets that then threaten the economy. We got close to that in January and February.

To be honest I am amazed by the blatant disregard of risk in today’s market environment. Particularly when the wheels are coming off of the economic growth and stocks are selling at Shiller’s P/E of 26. But this is not the first time I am seeing this kind of an environment. I saw the same in 1999-2000 on the Nasdaq and in 2007 in real estate/credit markets.

Invest accordingly.