Did I write that big enough? Maybe not. Let’s try again:


He provides his reasoning.

Okay, you get my point. Of course, saying it isn’t enough. There should be some empirical data to back up this assertion. First, a bear market in bonds is nothing like a bear market in stocks. When someone compares the two instruments it means there is a high likelihood that they don’t understand the capital structure very well and haven’t connected all the dots here. A fixed income instrument has several embedded safety components that make it entirely different from stocks:

It’s higher in the liquidation chain.
It pays a “fixed income” over the course of its life.
If held to maturity fixed income pays you back at par.
The duration on a fixed income instrument is generally shorter than that of common stock.

Two words stand out: safe and substitution.

The reasons provided, considering safe first.

What type of bond? Government [sovereign] bonds, Municipal bonds, or Corporate bonds? The argument seems to be Corporate bonds for Corporate dividends.

If that is the case then, if the company goes bankrupt, neither common stock nor the bonds are a safe investment. It is true that secured bonds are higher in the liquidation chain and some value may be salvaged, pennies on the dollar, hardly a ringing endorsement.

That it pays fixed income is a two edged sword. Assume a 10yr bond [longer is worse] in an inflationary environment. That fixed income is eroded. A dividend however is not fixed. It can be raised [or dropped/eliminated] which can offset the inflationary erosion. KO being an example that has worked out well.

If held to maturity there is no chance of capital gain. Stocks however have enormous potential for capital gain.

“Duration” is not related to length to maturity, it is related to volatility, so Cullen needs to do a little homework there. Both are volatile, common stocks as a class I accept are more volatile. Is volatility analogous to safety? No.

Now you can consider whether substitution makes [more/less] sense.


For ten years, the Chinese have maintained a fixed exchange rate of about 8.28 yuan to the dollar. As has been well documented, the US has been a great importer of Chinese goods. We take their merchandise and they take our dollars.

According to James Grant, “the dollars pile up on the balance sheet of the People’s Republic of China at the rate of $10 billion per month.” Such trends are unsustainable. At some point, the Chinese are going to have to stop acquiring dollars at the fixed rate. The yuan, it seems, is too cheap at that rate and the Chinese money supply is booming. People are eagerly swapping their dollars for yuan.

Meanwhile, money and credit are booming in China. As Grant writes, “It is therefore no accident that the Shanghai real estate market is on fire, that Chinese loan growth is burgeoning or that frightened Chinese monetary authorities have been unable to keep the lid on Chinese money-supply growth. By making the yuan too cheap, they have also, necessarily, made it too plentiful.”

The resulting artificial boom in China is no good for the Chinese. A bust follows every such boom. If allowed to float, the yuan would presumably get stronger, and some of the money flows would slow or even reverse. It may be too late for China, whose government seems just as intent on destroying their currency as American officials seem bent on destroying the dollar — whether knowingly or not.

Count the yuan dollar fiasco as just another chapter in the long saga of man’s futile struggle to master paper money. The unattainable dream is to be able to produce as much of it as possible at near zero cost and yet also have it maintain its purchasing power in the real world of things.

Murray Rothbard wrote “Governments don’t know, and don’t want to know, that the only successful fixing of exchange rates occurred, not coincidentally, in the era of the gold standard.” The reason is easy enough to understand. It worked because monetary units, like the dollar, were fixed in terms of their weight in gold. Gold has to be extracted, manufactured within the market, and cannot be created out of thin air.

But government planners don’t like gold. It ties their hands. They can’t spend so freely because they know they have to redeem their monetary issues in gold. It checks their inflating ways.

It’s easy to be depressed when you look around and see the state of monetary affairs. But, as Rothbard noted, and as the short historical vignettes above show, we have one great force in our favor. As Rothbard cheerfully noted, “Free markets, not only [in] the long run but often in the short run, will triumph over government power.” The inability of governments to maintain fixed exchange rates in the face of opposing market forces is only further proof of their impotency.

The difficulty with these time frames is structuring a trade to profit from the economic forces.


Federal Revenues

The economy growing slowly as measured by tax receipts.



Feeds through to NZ.


A Jolt To The Outside Of The Head

First you strap a small device to your head, making sure that its electrodes are lined up in just the right way, and then flip a switch. A small jolt of electricity is delivered to your brain. All of a sudden, you feel a slight buzz that soon fades. Fogginess and anxiety clear away — you’re suddenly able to solve puzzles that stumped you before, you can discern patterns out of noise, and your memory works significantly better.

According to neuroscientists and a large community of DIY brain hackers, that’s not science fiction — its already the reality of TDCS. Many researchers still have questions about how effective brain stimulation will be in the long term, but there’s a lot of promising research so far.

What this does is provide a fairly broad but small dose of electricity to the brain, affecting millions of cells, and enhancing performance along the way.

“TDCS is more of a shotgun approach than a scalpel approach,” says Weisend. They try to target a region and make sure as much electricity reaches that region as possible, but a broad beam is sent out along the way. Luckily, most results so far have shown that in supervised lab conditions, these techniques are safe.

So far, this technique shows the most promise for improving memory, pattern recognition, and vigilance — the ability to pay attention — according to Weisend. His team has tested or demonstrated TDCS on more than 500 people, including Radiolab’s Jad Abumrad, and among other things, they have shown that people learning a new skill can learn twice as much as people who receive the same training but no stimulation.

Other studies have shown that electrical stimulation can provide the same energy boost as giving someone a cup of coffee. Researchers have found that people who undergo brain zapping sessions can enhance their mathematical abilities for up to six months. The increased focus it provides can even give people a huge boost in U.S. military sniper training simulations. The military has also found that it can help pilots better pick out targets from radar images.

Promising results and cheap, easy-to-build devices have made battery-powered brain stimulators a favourite of the DIY community, especially for people interested in boosting their own brain power and for video gamers, who can use any boost in focus, vigilance, and the ability to see the next guy before he sees you.

These self-experimenters give neuroscientists like Weisend pause, however, as they may not be as careful as research teams and also can create unrealistic expectations for the technology.

“What we know is that changing the way a brain functions can make it perform better,” says Weisend, but he also says that “the most interesting days for TDCS are definitely down the road” — when we better understand how it works.

A Chip In Your Skull
There are ways to have a much more direct impact on the brain than the broad one external electrical stimulation applies — if you are willing to put a sort of computer chip inside your skull.

Those same implants that are already used for vision and hearing could be used to enhance those senses far beyond normal as technology improves and as we better learn how to communicate that information to the brain.

But one of the first neural enhancements that we might see is one that improves memory, according to Marcus.

Already, the military is using research into neural implants and electrodes implanted into the brain to restore damaged memory in people with trauma. Marcus says we should eventually be able to build implants that extend memory and make it more reliable — people are trying to do it already. It’s hard to say when we’ll be able to do that — maybe not this decade, Marcus says, but perhaps the one after that.

First, we’ll have to figure out how the brain codes away and stores memory.

That’s the hurdle for a lot of this research, and it’s hard to predict when we’ll jump it. But governments and research institutions around the world have set modelling and understanding the brain as one of the top scientific priorities of our time.

Once we know how the brain changes as it stores information and implants a new skill, a brain implant could mimic that effect, making it possible to actually download the brain changes that would come with practice. A neuroscience and technological challenge like that may be far away — but we’re talking about 50 year projects, not 500 year projects, says Marcus.

What’s Next
No matter what type of technique we talk about, experts agree that aren’t quite there yet — though we’re a lot closer than most people think.

With regard to TDCS, Weisend thinks it will be incorporated into training programs (the military could save billions of dollars if they could cut training time short), treatment for drug resistant brain disease, and maybe in professional occupations that demand a lot of focus and where lives are on the line.

Marcus is excited about the possibilities of neural implants, but he also thinks that our perspective on all this will be transformed as we learn more about how the mind works. “I think that the techniques we have now are going to look really crude in 30 years,” he says.

But it’s going to happen. And the world is going to change with it.


The index [SPY, DIA] are sitting at a technical buy set-up.


If the Fed starts to allow rates to rise, bonds will enter a bear market. Stocks should outperform. Outperform might mean lose less. At some point, if rates continue to rise, stocks enter a bear market.



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