Economic Analysis

“The Bond Rally of a Lifetime”

Outside the Box

August 10, 2016

In 1981, as inflation and Treasury yields were screaming to new heights, good friend Gary Shilling had the audacity to announce, “We’re entering the bond rally of a lifetime.” He was right, as that bond rally is already 35 years old and I think it will see a few more birthdays. Gary’s with us today to assert that the rally is still underway – and to back up that assertion with a rather compelling case for Treasuries and for the “long bond” (the 30-year) in particular.

Gary recalls his famous...

World Gone Backwards

Thoughts from the Frontline

August 7, 2016

 “The growth model China has relied on for the last 30 years – one predicated on low-cost exports to the rest of the world and investment in resource-intensive heavy manufacturing – is unlikely to serve it well in the next 30 years.”

– Gary Locke

“In this 21st century world, some of our country’s most significant exports extend beyond goods and services. They also include innovation, knowledge, discovery, and healing.”

– Kathleen Sebelius...

Toynbee’s Europe

Outside the Box

August 3, 2016

In today’s Outside the Box, Charles Gave offers an incisive and absolutely scathing indictment of the latter-day European project. Harking back to the historian Arnold Toynbee, Charles reminds us that “the role of ‘elites’ in any society is to handle challenges that allow the group to survive and move on to the next phase of their shared journey. If bad solutions are offered up then problems will intensify and pressure will arise for a change in the elite.”

In the postwar era, Charles asserts,...

The Trouble with Trade

Thoughts from the Frontline

July 31, 2016

“When goods don’t cross borders, armies will.”
– Frequently attributed to Frédéric Bastiat

“Free trade agreements are trade agreements that don’t stick to trade.”
– Ralph Nader

“The future has arrived. It’s just not evenly distributed yet.”
– William Gibson, circa 1993 in an interview (original version of the quote)

Crisis Actors and a Reichstag Fire

Outside the Box

July 27, 2016

This week your Outside the Box is from my friend Ben Hunt, who writes his letter under the title Epsilon Theory. This edition is a little darker than usual, and certainly more of a think piece. A central argument that Ben makes in Epsilon Theory is that it is Narrative that is the driver of politics, economics, and social interaction generally. The Narrative is what we all (mostly) believe and act upon. Investors generally believe that quantitative easing is going to result in a rising stock...

Promises, Promises, Pension Promises

Thoughts from the Frontline

July 24, 2016

You made me promises, promises
You knew you’d never keep
Promises, promises
Why do I believe?

Naked Eyes (1983)

The Bond Market: Beware of Junkyard Dogs

Outside the Box

July 20, 2016

It should come as no surprise that credit spreads are shrinking between what in theory are risk-free investments and other investments. Retirees and other investors are reaching farther and farther for yield, piling into all sorts of increasingly risky investments.

My friend Danielle DiMartino Booth, formerly at the Dallas Fed and now writing on her own at the eponymous website, covers a wide range of topics that are affected by central-bank policies. Today she deals...

The Age of No Returns

Thoughts from the Frontline

July 16, 2016

“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.”

– Robert Frost

“Money won’t create success. The freedom to make it will.”

– Nelson Mandela

Hoisington Investment Management – Quarterly Review and Outlook, Second Quarter 2016

Outside the Box

July 13, 2016

It has come to be a near truism that high levels of government debt and deficit spending suppress economic growth, but how exactly does that happen? In today’s Outside the Box, Dr. Lacy Hunt and Van Hoisington of Hoisington Investment Management give us a very detailed explanation of the dynamics involved.

On the deficit spending front, the authors state that the best evidence suggests that the US government expenditure multiplier is -0.01, which means that each additional dollar of deficit...

When the Future Becomes Today

Thoughts from the Frontline

July 10, 2016

“There are decades where nothing happens, and there are weeks where decades happen.”

– Vladimir Lenin

“However beautiful the strategy, you should occasionally look at the results.”

– Winston Churchill