Gary Shilling on Why You Should Own Bonds

As a follow-up to Tuesday's post of Shilling on an Abundance of Commodities--Gary Shilling on Why You Should Own Bonds [Source: Advisor Perspectives, excerpt follows, full article at link]:

"Global devaluations - The currencies of commodity-producing countries have been weakening... The euro is being “deliberately trashed” by the ECB, he said, which is looking to spur exports. The follow-on will come from nearby currencies, Shilling said. South Korea is devaluing in response to Japan’s actions. While most central banks are devaluing through quantitative easing, some are cutting interest rates to weaken their currencies. We now face an environment of “universal devaluations,” Shilling said. The only winner is the dollar (except for Switzerland and Denmark who, he said, cannot devalue because of trading relationships). “We are stuck,” he said, with a strong currency.

"Investment recommendations - Shilling still recommends the long-dates U.S. Treasury bonds. Forecasts by economists have been for rising rates, he said, going back as far as 1981. But those forecasts have been consistently wrong. “I think the 10-year is going to 1%,” he said, “not 2.9% as economists forecast.” That would result in a 12% return over a one-year horizon. It’s not just because U.S. Treasury bonds are safe haven, he said, but also because their spread is high relative to all other sovereign bonds... Investors should short commodities, particularly copper, he said... Stocks overall, he said, are still expensive, based on the Shiller CAPE ratio...“With Fed out of the picture, we are going back to much greater dispersion and volatility.”... prepare for a risk of a “shock” that could result in a worldwide recession and a bear market... the only change to his investment recommendation would be to avoid all stocks...."

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Gary Shilling, Abundance Of Commodities (video)

Gary Shilling Eyes Abundance Of Commodities -

The world is awash with commodities, says investing guru Gary Shilling. (Published Feb 21, 2013)

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Why Austerity Will Not Save Greece (video)

Austerity programs demanded by Greece's debtors are pinching the country's economy. And history shows that very few countries have been able to meet the surpluses the Troika is asking for from Greece. Blooomberg's Brendan Greeleyexplains how to measure austerity and how it is unlikely to help Greece get out of debt. (Feb 19, 2015)

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Corruption, Eradicated?

Can Corruption Be Eradicated?: "....It seems unlikely that any outside force can introduce enough carrots and sticks to persuade a country to reform its political system. When Romania was campaigning for admission to the European Union, in 2003, it launched an anticorruption drive, and appointed a tough justice minister who spurred a series of corruption cases against senior officials. As soon as Romania joined the E.U., in 2007, the campaign fizzled, the justice minister was fired, and the cases were dropped. “A fish rots from the head,” Chayes observes, and, in the absence of national leaders with integrity and political will, it doesn’t appear that the United States will be able to reverse the pathologies in Afghanistan, Iraq, or any other country, notwithstanding Washington’s share in creating and sustaining some of those pathologies. Indeed, we may struggle to differentiate between the kinds of patronage that might assuage a population—the “glue” that Thomas Barfield describes—and the state-sanctioned larceny that Chayes argues, convincingly, is a threat not just to Afghanistan’s national security but to that of the United States...." (read more at the link above)

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America, China, Economic Parity

The Real Story of How America Became an Economic Superpower - The Atlantic: "... Tooze’s story ends where our modern era starts: with the advent of a new European order—liberal, democratic, and under American protection. Yet nothing lasts forever. The foundation of this order was America’s rise to unique economic predominance a century ago. That predominance is now coming to an end as China does what the Soviet Union and Imperial Germany never could: rise toward economic parity with the United States. That parity has not, in fact, yet arrived, and the most realistic measures suggest that the moment of parity won’t arrive until the later 2020s. Perhaps some unforeseen disruption in the Chinese economy—or some unexpected acceleration of American prosperity—will postpone the moment even further. But it is coming, and when it does, the fundamental basis of world-power politics over the past 100 years will have been removed. Just how big and dangerous a change that will be is the deepest theme of Adam Tooze's profound and brilliant grand narrative." (read more at the link above)

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Brexit Unlikely If EU Terms Renegotiated says Boris Johnson (video)

`Brexit' Unlikely If EU Terms Renegotiated: Boris Johnson -

London Mayor Boris Johnson talks about the Greece's future and the outlook for the U.K.'s membership in the European Union. Johnson, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses concerns over citizens who join Islamic State. (Feb. 11)

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Greece vs Europe, Who Will Blink First? (video)

Greece vs. Europe: Who Will Blink First? -

Yannis Manuelides, a partner at Allen & Overy, discusses Germany and Greece drawing battle lines ahead of an emergency meeting of official creditors. He speaks with Bloomberg's Trish Regan on "Street Smart" February 10th.

What is Happening? Get the Important Stuff Using Online Tools

The Important Stuff--what is really going on in the world--you will not find using MSM without wasting a lot of time (e.g., I have just about given up on Bloomberg, including Bloomberg TV since it was taken over by political junkies and media mavens), but you can use online sources and "tools" such alerts, notifications, RSS, and emails, to effortlessly stay informed without wasting time (or money), just be selective so you are not overwhelmed--here's a sample of the Feb 11th morning email (one of my favorite "tools")--and yes, it is free!) from Seeking Alpha's Wall Street Breakfast (excerpts below--note: all links have been removed--get the "real" content by signing up at Seeking Alpha [disclosure: I am a subscriber but this is not a paid endorsement]:

"Economy
"What we want is a deal. But if there is no deal...then we have the obligation to go to Plan B. Plan B is to get funding from another source," said Greek Defense Minister Panos Kammenos early Tuesday. "It could be the United States at best, it could be Russia, it could be China or other countries." Meanwhile, Greece is in the middle of trying to negotiate a €10B bridge deal to stave off a funding crunch, as it tries to buy time to negotiate with its creditors ....

"The recent surge in oil prices is just a "head fake" and West Texas crude as cheap as $20/bbl may soon be on the way, warned Citigroup (NYSE:C), lowering its crude oil forecast again. Despite declines in spending that have helped oil prices rebound in recent weeks, U.S. oil production is still rising, Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share...

"Stocks
"In the final stages of a long-running investigation, the U.S. Department of Justice has recently informed Barclays (NYSE:BCS), JPMorgan (NYSE:JPM), the Royal Bank of Scotland (NYSE:RBS) and Citigroup (C) that they must plead guilty to criminal charges that they manipulated the prices of foreign currencies, NYT reports. Last November, regulators fined five major banks a total of $3.4B for failing to stop traders from trying to manipulate the foreign exchange market, following a year-long global investigation.

"In a separate probe disclosed today, the NY Department of Financial Services was reported to have sent subpoenas to Goldman Sachs (NYSE:GS), Credit Suisse (NYSE:CS), BNP Paribas (OTCPK:BNPQF) and Societe General (OTCPK:SCGLY), expanding its investigation of whether the banks' electronic forex trading platforms allowed them to front-run clients. At issue is a latency period between the time an offer is floated and accepted. The department is already probing Barclays (BCS) and Deutsche Bank (NYSE:DB) over similar concerns and installed monitors at those banks in recent months.

"U.S. prosecutors have stepped up efforts to establish whether HSBC (NYSE:HSBC) helped Americans evade taxes after the bank admitted yesterday to helping customers dodge taxes and conceal millions of dollars of assets at its Swiss subsidiary. U.S. authorities are also probing whether HSBC manipulated currency rates, which could prompt the Department of Justice to revisit a 2012 deferred prosecution agreement with the bank. HSBC -1.7% premarket...."

"Wall Street Breakfast, Seeking Alpha's flagship daily business news summary, is a one-page summary that gives you a rapid overview of the day's key financial news. It's designed for easy readability on the site or by email (including on mobile devices), and is published at 6:30 AM ET (US) every market day. Wall Street Breakfast readership of over 300,000 includes many from the investment-banking and fund-management industries. Sign up to receive the Wall Street Breakfast in your inbox every business day here: http://seekingalpha.com/account/email_preferences

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Burning Man, Will the Billionaires be Kicked Out? (video)

Burning Man, Will the Billionaires be Kicked Out? (video above) - Bloomberg's Felix Gillette discusses the billionaires that attend the annual Burning Man event in the Black Rock Desert in Nevada. He speaks with Bloomberg's Cory Johnson on "Bloomberg West."

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US, Afghanistan, Iraq, Corruption, Waste

Can Corruption Be Eradicated?: "....Every day, millions of dollars in cash were declared by couriers at Kabul International Airport, and then flown to the United Arab Emirates, where the new Afghan élite invested in real estate and Bentleys. According to the Special Inspector General for Afghanistan Reconstruction, the United States has, since 2002, spent a hundred and four billion dollars on rebuilding the country (nearly as much, in today’s dollars, as was spent on the Marshall Plan), a large but untold fraction of which was skimmed away by middlemen before it could produce any tangible improvement for the Afghan people. “We know all this money is coming in,” a farmer outside Kandahar told Chayes, yet there was little the local population could do as it vanished. For the average Afghan, it was like watching a slow-motion heist in broad daylight...."

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Global Monetary Policy, What Central Bankers are Worried About, Deflation

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hat tip: Global Monetary Policy Amidst Deflationary Concerns | The Big Picture

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US Travel and Medical Companies, New Opportunities in Cuba

New Opportunities in Cuba for U.S. Travel and Medical Companies – Cigars but not Commerce | Baker Donelson - JDSupra:

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Scope of Permissible Cuba Transactions

Shifting Course: Expanding the Scope of Permissible Cuba Transactions | Morrison & Foerster LLP - JDSupra:


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Economy: Housing Weak due to Consumer Debt, Credit Standards

Housing Weak Even With Government Programs and Big Bank Interest - Bloomberg View: "... the federal government is trying mightily to spur housing activity. But don’t expect this small but volatile sector to move the economic needle anytime soon, even as 30-year mortgage rates drop. The headwinds from consumer debt, high down payments, unforgiving credit-score standards and worries about another swoon in home prices are too strong. " (read more at the link above)

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Gold Standard, Central Banks, Economic Outcomes

Link: Would a Gold Standard Brighten Economic Outcomes? | The Big Picture

Let me spare you the TLDR version at the link above:

Conclusion: 
A gold standard ties the value of money to a country’s stock of gold reserves. While some argue that a gold standard can effectively maintain price stability over long periods, governments still have the ability to change their money supply and price level simply by changing the official gold-to-money ratio. Moreover, a gold standard can be problematic because of sudden gold inflows and outflows that cause the supply of money, and therefore prices, to fluctuate. In theend, a gold standard is not needed to preserve price stability as long as a country’s central bank is independent and has a clear mandate to achieve price stability. (emphasis added)

The problem is that the Federal Reserve, like most if not all Central Banks, does not have a clear mandate to achieve price stability--instead the Fed has a clear mandate to inflate and create bubbles in the hope of achieving "full employment."

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Secular Stagnation, Debt Overhang, Sluggish Growth, Six Years On

Stagnation

https://www.scribd.com/doc/253529698/Stagnation

Conclusion: There are many plausible reasons why global growth remains relatively sluggish six years after the default of Lehman Brothers. Sorting out the various theories may take another decade or more of data. Indeed, slow growth itself is hardly a fait accompli. There are conflicting signals from markets, with global stock markets seeming to embody high-growth expectations even as global debt markets appear to embody much lower ones, even adjusting for risk, liquidity and safety factors. One reason it is too soon to sort out the alternative viewpoints is simply that the pace of deleveraging remains modest or non-existent in many sectors around the global economy, implying that the debt overhang may still be a significant impediment, even if debt crisis risks have receded for the moment. Thus, exploring ways to continue advancing private sector deleveraging, without excessively eroding the capacity of the public sector to backstop the system and handle catastrophes, remains an important challenge in restoring growth.

tip of the hat to: Secular stagnation, debt overhang and other rationales for sluggish growth, six years on | The Big Picture

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Ann Pettifor on Europe (video)

Ann Pettifor on Europe -

To discuss the UK and the ECB, Erin sat down with Dr. Ann Pettifor – director of Prime Economics and author of “Just Money: How Society Can Break the Despotic Power of Finance." Recently, a shortfall in tax revenue for the UK government has called the ruling coalition's deficit reduction targets into question. Ann tells us whether the British economy is strong enough to meet Chancellor Osborne's deficit targets. Ann also gives us an extended analysis on Greece’s economic turmoil and predictions on what will follow the elections.(published Jan 31)

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Starbucks Coffee, Seattle, Pike Place Market, CEO Howard Schultz (video)

For its 85th anniversary, Bloomberg Businessweek chronicles the most disruptive ideas of the past 85 years. In 1971, Starbucks Coffee opens in Seattle's Pike Place Market. CEO Howard Schultz gave American coffee a story and a lifestyle, taking it out of the kitchen and putting it onto almost every corner in America. (Video by Brandon Lisy. Music by Andy Clausen) (Source: Bloomberg)

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World Economic Forum, Highlights From Davos 2015 (video)

The Week That Was: Highlights From Davos 2015 -

Bloomberg's Stephanie Ruhle, Erik Schatzker, Jonathan Ferro, Guy Johnson and Francine Lacqua recap some of the highlights from the World Economic Forum in Davos, Switzerland (January, 2015)

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