Bill Gross – January 2012 Investment Outlook: Towards the Paranormal
The New Normal, previously believed to be bell-shaped and thin-tailed in its depiction of growth probability and financial market outcomes, appears to be morphing into a world of fat-tailed, almost bimodal outcomes.
A new duality – credit and zero-bound interest rate risk – characterizes the financial markets of 2012, offering the fat left-tailed possibility of unforeseen policy delevering or the fat right-tailed possibility of central bank inflationary expansion.
Until the outcome becomes clear, investors should consider ways to hedge their bets, including: maximizing durations, U.S. Treasury bonds that may potentially offer capital gains, long-term Treasury Inflation Protected Securities (TIPS), high quality corporates and senior bank debt, and select U.S. municipal bonds.
- Hussman Weekly Market Comment: All Of The Above
Notes on fruitless monetary policy The prospect of continued tepid economic growth, if not recession, might be taken as evidence that the Fed will not taper its program of quantitative easing anytime soon. I actually think this inference is incorrect....
- Bridgewater On An Ugly Inflationary Deleveraging
I thought this was an interesting quote to keep in mind in light of the Fed's open-ended QE announcement today. If we ever start to reach “that phase”, someone please remind me of this excerpt. From a Bridgewater piece with the title “Asset...
- Bill Gross – December 2011 Investment Outlook: Family Feud
Proposals from the German/French axis in the last few days have heartened risk markets under the assumption that fiscal union anchored by a smaller number of less debt-laden core countries will finally allow the ECB to cap yields in Italy and Spain and...
- Hussman Weekly Market Comment: Charles Plosser And The 50% Contraction In The Fed's Balance Sheet
Especially good/important commentary from John Hussman this week.In my view, this is a major problem for the Fed, but is the inevitable result of pushing monetary policy to what I've called its "unstable limits." High levels of monetary base, per...
- Hussman Weekly Market Comment: The Destructive Implications Of The Bailout - Understanding Equilibrium
One of the features that has enabled the bureaucratic abuse of the public during the past year has been the frantic, if temporary, flight-to-safety by investors. The Treasury has issued an enormous volume of debt into the frightened hands of investors...