Heart, brains and valour needed as wicked witch of West's economy melts

Hail Dorothy, the wicked witch is dead! In the classic movie, the Wizard of Oz, this is the ending of one era and entering of another.

However, in contrast to Dorothy, who was going to return to Kansas, 21st century investors in this real-time, debt-laden world are not likely to return to the halcyon days of lower credit cost and unlimited availability that drove much of the last 25 years’ growth in America. For most of today’s investors, their investment framework was simple and reliable: economy gets in trouble, consumer spending plummets, Fed drops borrowing costs, buy stocks. Then wait a few years until the next crisis and repeat. In the early 1980s with a discount rate of around 9%-10%, the discount rate was driven...