Transcripts

"Two Ways to Play"-Kevin Depew of Minyanville

SUZANNE PRATT: When it comes to the recession and America's debt levels, do we have too much or not enough? Tonight's "Two Ways to Play" says it depends on how you see it. Here's Kevin Depew of Minyanville, and Minyanville's Kevin Depew.

KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: Everywhere we turn these days, we're bombarded with the same message -- namely, that there's too much debt. There are entire television shows devoted to this theme and even seminars that, ironically, charge you an arm and a leg to explain exactly why you have too much debt. That's the conventional wisdom. But if we look at the U.S. debt load in a global context, where the U.S. is only about a quarter of GDP, we're actually under-leveraged. Keep in mind our return on assets is high, our interest rates very low and so our ability to borrow and service debt is much greater than current levels. If anything, we don't have too much debt; we have too little. I disagree. What is important is lending for productive reasons. For example, if someone were to invent a miraculously cheap way to produce energy, but it needed a vast amount of financing to implement, in the long run, it could be worth the increase in debt because future production would pay for it. Instead, we're financing unproductive assets like houses, condos and televisions. The market was going through the painful process of destroying this unproductive debt, which would have been a good thing, but massive government intervention stopped it. Now, we're propping up worthless assets. It won't last and with every tick higher in the market, risk is increasing.