Globe & Mail interview with Stephen Jarislowsky

I don't know much about Stephen Jarislowsky but have read some stories about him in the past. He primarily seems to be an activist investor but I thought it's worthwhile for anyone reading this blog to check out his interview with The Globe & Mail. He is a deflationist whereas I'm still in the disinflation camp.

Here are some excerpts:

Q: Some market seers say that what we're seeing is a revisiting of the tough investing environment of the 1970s.

It's nowhere near like it. At that time, we went to inflation and high interest rates. Now we're going to deflation and we already have very low interest rates. This is a 1929 bubble-and-balance-sheet recession. We are going to see the lowest valuations in stocks since the Depression.

Q: How does a balance-sheet recession differ from a plain, run-of-the-mill kind?

In an ordinary recession, demand for goods is less and commodity prices come down. A balance-sheet recession is where you have a big bubble, and everybody and his brother has to de-lever in order to become really solvent again. By that, I mean they have to get debt off their balance sheet. The more everybody [reduces debt], the deeper the recession becomes, unless it's counteracted by fiscal spending.

...

Q: In a deflationary environment, what should investors be doing to protect themselves?

[Deflation] makes money more valuable. What you do, basically, is you go into cash or [corporate] bonds with good spreads. When the deflation stops, hopefully as a result of government fiscal policy, you have to leave the cash and go into the cheap stocks. That could take another two, three years.