The only retailers he has invested in are auto retailers and auto part store chains. "The American consumer is getting more realistic," he observes. "Two of my kids have cars with 140,000 miles on them. Globally, the auto business has a huge supply overhang and much of it from here to Malaysia is government-supported."
A cold-headed realist, Leuthold seems confident that the markets and the economy can enjoy clear sailing until mid-2010. At that point, the Great Recession will have receded into memory and long-term structural problems will move to the forefront. But already, the equity market is pricing in a lot of what he anticipates will be next year's economic improvement.
On the money supply front, Leuthold notes both M1 and M2 have stabilized since March and the deficit, once projected at $2 trillion, has fallen to $1.4 trillion, largely due to early TARP repayments. But that's small comfort.
While voicing some satisfaction that some of the more ambitious elements of the Obama administration's agenda seem to be flagging, Leuthold still doesn't think the U.S. has begun to really address its most intractable problems. "I don't think you'll ever see the U.S. savings rate go above the 7% level," he predicts. "Americans are still spenders and still fiscally irresponsible, just like their government. But for now, people's propensity to spend will stay lower because of credit cards."
Equally disturbing in his view are the distortions that arose over the last decade and the way government involvement is likely to accelerate. In Leuthold's view, it should be businesses that take the big risks and financial institutions should try to manage them. Unfortunately, that paradigm reversed itself in recent years, and going forward, both business and banking are likely to be more risk-averse. That leaves only the government and foreign countries to take the big risks that American businesses have historically embraced to drive innovation, productivity and create higher living standards. And that's why Leuthold remains only a short-term bull.