There's an excellent Economist article about the big 3 domestic automakers. The outlook is dire: between their debts, pension and healthcare liabilities, General Motors, (Daimler)Chrysler and especially Ford are on the verge of collapse. They have no free cash flow and their credit ratings teeter on the edge of junk.

Of course, the contrarian will take this as a buying opportunity. Their stock prices are low and going lower. They have a lot of money pass through their hands and if an enterprising CEO found a way to funnel that to some other business (one thinks of GM Hughes), it might work out well.

The Pokeypine is pretty bearish on the next ten years because of the following factors:

• Baby boomers retire. Fewer workers, more elders to support and they haven't saved much, so won't have much to spend.
• PC/Internet boom has run its course. I've made money investing in this for a quarter of a century, but where are the gains now? Biotech and healthcare look promising, but have disappointed so many times. Nanotech is too far in the future.
• World oil production peaking sometime between 2005 and 2045 means higher oil prices, job loss and recession.
• Interest rates are low now and may stay low for years (like Japan) but must inevitably rise. This will hurt business, the stock market and consumers. Home prices may fall, especially in places like California where buyers are forced to go with adjustable rate mortgages to be able to afford a home at all.

So where to invest?

The March 15, 2004 edition of Barron's has a couple of interesting articles. One suggests that a rise in oil prices will especially favor oil production companies, ones that aren't integrated with refining, retail, etc. They have oil in the ground which will become more valuable. Specific companies named are Devon Energy, Apache and Anadarko Petroleum. Oil service companies such as Schlumberger will also benefit. But the production companies are attractively priced with low P/E and decent dividends.

Another article extols Citigroup, the largest financial services company. It has a P/E of about 12, pays a 3.3% dividend, and may have 10% growth this year. A good, conservative investment. Of course, it's a bank and banks fared poorly in the stagflation of the 1970s (as noted earlier), but perhaps they have learned from that era and are less vulnerable now.

Tickers and current prices: DVN 58, APA 42, APC 52, SLB 64, C 50.

As to fixed income, intermediate and long-term bonds are very risky right now, as they will drop when interest rates rise. Money market funds are also looking unattractive as they pay hardly anything. That leaves short-term bonds as the best bet in this area.