"I have pasted below an article in today's FT written by Jamil Baz (GLG). It is a coldly objective piece. If correct, it is a strikingly bearish scenario. Have you any thoughts considering your wise and philosophical perspective on markets?"

David Fuller's view Thanks for this email and article, certain to be of interest to many subscribers.

In terms of "wise and philosophical perspective", I do not think any of the delegates or speakers at last year's Contrary Opinion Forum will forget your prescient summary of the Eurozone crisis during the concluding Q&A session.

Regarding Jamil Baz's article: Current debt crisis merely a warm-up act, it is certainly sobering. I have spent a career to date saying that we should regard extreme forecasts - up or down - as probable contrary indicators. Therefore, how nice it would be if we could dismiss Jamil Baz's view as a gratuitous rant from an inexperienced hack and congenital bear. He has certainly been bearish in the last few years but is a highly experienced and successful hedge fund manager, and also a lecturer at the University of Oxford, as you will see from this condensed portion of his biography on Bloomberg. He also has two degrees from Harvard and another from MIT.

None of this guarantees that his latest views are correct, but it does suggest that they should be taken seriously. Regarding Jamil Baz's specific points, and you will appreciate that the economic detail is not my area of expertise but I do have some observations:

On total public and private debt for the 10 western countries mentioned plus Japan, my understanding is that public debt has been intentionally increased to cushion the deflationary impact of private deleveraging (both household and corporate). (See also this report from Torsten Slok of Deutsche Bank on this subject, posted by Eoin on 22nd June 2012.)

Yes, overall debt levels in these countries are extremely high but many corporations have very healthy balance sheets, not least the Autonomies.

Regarding, "it will take a minimum of 15 years or so for the economy to reach escape velocity", this may or may not be correct but it is at the extreme end of forecasts that I have seen. Meanwhile, I have always assumed that individual countries will variously address their debt problems in five ways:

1. Partial default (as we have seen with Greece)
2. Deleveraging via a combination of cutbacks and tax increases
3. Future inflation via QE money printing programmes
4. Competitive devaluation
5. GDP growth

Obviously GDP growth is the preferred option but is not quickly or easily achieved during deleveraging. Nevertheless, pro-growth policies should be the priority. Also, if the China-led growth engine can be stoked, this would help indebted countries considerably. Obviously, individual Eurozone countries do not have the option of devaluation but the euro can and is being devalued. I assume that combinations of these five means of reducing the quantity of debt or its real cost will continue to be deployed.

I think Jamil Baz's fourth point is too bearish and he appears to be lumping all companies together. Yes, profitably has fallen within heavily indebted countries, for all but the most defensive industries, but many firms continue to benefit from productivity increases, initially due to layoffs but increasingly via accelerated technological innovation. Also, many multinational companies are prospering via their businesses in the world's high-population growth economies, where we OECD country citizens can and should also invest. Additionally, the cycle of valuation contraction, to which I have often referred, is making many companies more attractive, not least where they are able to increase dividends from earnings cash flow. The corporate bonds and shares of Dividend Aristocrats with strong balance sheets are considerably more attractive than government bonds, in my opinion, even though they may be more volatile.

Jamil Baz's fifth point is valid but I think western governments and Japan can and should do more to promote economic growth. Useful infrastructure projects and tax incentives for business start-ups would help. Today's low interest rates in many countries reduce funding costs for these projects.

Regarding asset classes, bonds of solvent governments and corporates should indeed do well. The shares of corporations offering the prospect of earnings and dividend growth should do even better, more often than not. It is illogical of Jamil Baz to assume that while the bonds of solvent corporations should do well, their shares should revert to new lows. Many of them continue to do extremely well.

Lastly, the eleven heavily indebted countries mentioned by Jamil Baz do not exist in isolation. A partial transition from export reliance to domestic consumption and public service industries is occurring in the China-led growth economies. Once GDP growth picks up in these countries once again, as it will in response to the monetary and fiscal stimulus that is being applied, plus the benefit of cheaper crude oil, these factors will contribute to increased export and tourism earnings in the indebted countries.