Friday, March 23, 2012

It's The Economy Stupid: Stocks vs Bonds

“At a yield of 2.25%, the 10-year U.S. Treasury is a sure loser.  Stocks are a safer choice.”  ~ Burton Malkiel, The Wall Street Journal, Opinion Page, Page A15, Friday, March 23, 2012


Burton Malkiel is the Chemical Bank Chairman’s professor of economics at Princeton University, and is a two-time chairman of the economics department there. He served as a member of the Council of Economic Advisers (1975–1977), president of the American Finance Association (1978), and dean of the Yale School of Management (1981–1988). He also spent 28 years as a director of the Vanguard Group. Malkiel is most famous for his classic finance book A Random Walk Down Wall Street (now in its 10th edition, 2011). He is a leading proponent of the efficient market hypothesis, which contends that prices of publicly traded assets reflect all publicly available information, although he has also pointed out that some markets are evidently inefficient, exhibiting signs of non-random walk.




"I own stocks. Why? Because I don't trust treasury bonds.” ~ Nassim Taleb, CNBC, Tuesday, March 13, 2012


Nassim Nicholas Taleb postulated the black swan theory refering only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers before their occurance, collectively play vastly larger roles than regular occurrences.  Black swan events were introduced by Taleb in his 2004 book Fooled By Randomness, which concerned financial events.




“Given current valuations, we think it’s time to say a ‘long good bye’ to bonds, and embrace the ’long good buy’ for equities as we expect them to embark on an upward trend over the next few years.” The prospects for returns in equities versus bonds “are as good as they have been in a generation.” ~ Peter Oppenheimer, Goldman Sachs, Wednesday, March 21, 2012.


Peter Oppenheimer is the Chief Global Equity Strategist for Goldman Sachs International in London. 




“Rates in the U.S. on bond yields peaked in 1981, and hit their low in September/October last year.”  Chris Watling, CNBC, Tuesday, March 20, 2012.


Chris Watling it the Chief Executive of Longview Economics.




Bond Market Moving Into “Bear Phase”. ~ Paul Donaovan, Bloomberg Television’s Asia Edge, Thursday, March 22, 2012.


Paul Donovan is the deputy head of global economics for UBS AG.




John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721



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