Indeed, Dr. Shiller has reason for concern, as much as there’s been concern about the “coming blowup” since the last devastation in ’08. David Ranson, head of research for Wainwright Economics has been the Cassandra for a day of reckoning as well for some time. His is more a concern with high inflation and a stagflation global environment. However, as someone who has to advise institutional investors in the here and now, Wainwright must come up with actionable ideas to manage the time waiting for the inevitable storm.



Dr. Ranson notes there is indeed reason to think that the resilience of the global economy has increased since the enormous shakeup that accompanied the US financial crisis in 2008. This idea is reminiscent of the paradox that adversity generally makes human beings stronger rather than weaker.



There certainly are reasons to think this, and we will have to wait and see how much stronger we are for the adversity of the Great Recession. For now, the advisory’s bullish case for US stocks continues, but with a nod to a possible developing side wind.



The latest data for global economic uncertainty as expressed by corporate credit spreads show that the dismemberment of Ukraine and now Iraq has had unexpectedly little effect on these spreads. The Baa-Aaa yield spread reached 54 basis points this month and stands at 56 basis points, the lowest it’s been since 1997 for any length of time. Additionally, indexes of implied volatility for equities and bonds, which are also near historical lows, provide important confirmation of this interpretation.



Only a snap of wind has hit the filled sails – by way of a change in the gold-price signal the company also uses. For now, the gold signal is pointing away from US stocks and bonds, and toward physical, foreign, and real assets. Yet, Wainwright cannot tell whether this change is going to be sustained, or is a blip originating from volatility in the indicators. Coupled, the indicators imply what the investment research house calls a wind towards spot commodities and emerging markets. Or, if one thinks of the gold price change as rather small relative to historical gold-price changes, maybe it’s a wind toward B-grade bonds. That is, good further gains in risky assets, but weaker performance on the part of the US stock market. The same indicators imply performance gains in assets such as commodities and emerging markets.



Climbing walls of worry just isn’t enough while waiting for payback time.



Luis de Agustin

