The post below is a guest contribution by Comstock Partners, the highly regarded investment manager run by Charles Minter, arguing that government debt could double while private debt could be cut in half.

We believe that U.S. government and private debt levels will diverge over the next four or five years as the authorities attempt to use government debt to replace the private debt that is almost certain to decline substantially.  U.S. total debt is presently just under $55 trillion, comprised of public (government) debt of about $15 trillion and private debt (U.S. corporations and individuals) of about $40 trillion.  The similarities to Japan at its 1989 economic and market peak leads us to believe that we are close to the same road map that Japan was on starting at that time and continuing until today.  With that said,

The post below is a guest contribution by Comstock Partners, the highly regarded investment manager run by Charles Minter.

With the latest 60% gain in stocks since the March low there has been an almost universal feeling that, “the worst is over for stocks and the economy, and now there is clear sailing ahead”.  We, however, are looking at the dilemma of the U.S. economy as a relay race where the baton has to be passed on to the anchor team member who is very fast but has a problem receiving the baton.

We have to admit it does look like the “all clear” has sounded with the U.S. GDP about to be reported at somewhere in the range of 3% to 5% real gain in the third quarter.  This gain followed a less than 1% decline in the second quarter and around 6% declines in

A special report by Comstock Partners, the highly regarded investment manager run by Charles Minter, argues that US economic growth may be just as lethargic over the next 20 years as that of Japan during the last 20.

The first paragraphs are given below.

“We are in the process of deleveraging the most leveraged economy in history. Many investors look at this deleveraging as a positive for the United States. We, on the other hand, look at this deleveraging as a major negative that will weigh on the economy for years to come and we could wind up with a lost couple of decades just as Japan experienced over the past 20 years. It is true that Japan didn’t act as quickly as we did but our debt ratio presently is much worse than Japan’s debt ratios throughout its deleveraging process.

“Presently, the stock market is exploding to the

The paragraphs below are excerpts from the well-respected Comstock’s weekly market commentary, arguing that the stock market rally has probably exhausted itself in the absence of a strong economic recovery - an event unlikely to materialize any time soon. (As an aside, traveling through Europe at the moment it is also hard to see a quick resumption of decent growth in this region given the extent of the economic malaise.)

“The term ‘green shoots’ appears destined to go down in history with other unfortunate themes such as ‘a goldilocks economy’; ‘it doesn’t matter if internet companies have no earnings’; ‘high P/E ratios don’t matter’; ’subprime loans aren’t important’; ‘foreign economies have decoupled from the US’; ‘there’s plenty of liquidity’; and the classic ‘home prices never go down’.

“Whenever a herd of investors latches on to a popular theme, that theme most often proves to be wrong. So far the

BULL - June 1: Deutsche Bank US equity analyst Binky Chadha forecasts S&P 500 at 1060 by 2009 year-end, citing improving corporate profit margins.  He said aggregate profit margins for S&P 500 “remains well below the average of the last few years, implying considerable potential upside over the medium term.”

BULL - June 1: JP Morgan Chase analyst Thomas Lee forecasts 2009 year-end S&P 500 index at 1100.

BULL - June 1: Bank of America/Merrill Lynch analyst David Bianco forecasts 2009 year-end S&P 500 index at 1100.

BEAR - May 30: Morgan Stanley equity analyst Jason Todd says sell this S&P 500 rally. He says Morgan Stanley does not see large upside above 825-850.  He said,  “In the rush to buy a cyclical recovery, it seems earnings or valuation no longer matters. We would be comfortable with this view if the earnings trough was closer, but it is not.”

BEAR - MAY 28: Berkshire