The Trade of the Decade

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Posted by Addison Wiggin - The Daily Reckoning

on Tuesday, 30 March 2010 01:58

Trade of the Decade: Sell Everything

03/29/10 Laguna Beach, California – In the January 4th edition of The Daily Reckoning, Bill Bonner offered his new Trade of the Decade: Sell long-dated Treasury bonds, buy deep-value Japanese stocks. Your California editor agrees wholeheartedly with the first half of this trade, but has a different suggestion for the second half…and he shared these views in a recent presentation to the Investment University Conference in San Diego, California, which occurred on St. Patrick’s Day.

What follows is a lightly edited transcript of that presentation…

Happy St. Patrick’s Day to everybody. I have only one clean Irish joke to share with you, and here it is: What’s Irish and sits on your lawn? Patty O’Furniture.

That’s all I got.

Anyway, I wish the Luck of the Irish to everyone here today…as well as the luck of the French…the Swedish…the Latvians…the Brazilians…and the luck of every other nation on the planet…because I think we might need it.

As regular Daily Reckoning readers may know, I just rejoined the crew about five months ago. I originally wrote The Daily Reckoning with Bill Bonner near its inception. He started it in 2000; I joined him in 2001. I wrote it with him until 2005 and then I split off for a few years and wrote The Rude Awakening, and then rejoined him a few months ago.

So about 10 years ago, when I first started working with Bill, he came up with this idea for a Trade of the Decade. It was really just a literary device. But it ended up being a brilliant investment call. Everyone loved stocks at the time; and everyone hated gold. So Bill just took the other side of both trades: Sell stocks and buy gold.

This Trade of the Decade provided a great thematic backdrop for everything we would write about during the ensuing 10 years. We would write about the coming housing bust, about runaway government deficits and about lots of other things that provided absolutely no reason whatsoever to buy stocks, but plenty of reasons to buy gold.

For good measure, we would also write about the scoundrels on Wall Street and about the hazards of leverage. And every once in a while, we would write about the hazards of leverage in the hands of the scoundrels on Wall Street. And that was yet one more reason not to buy stocks.

So here’s a picture of the last 10 years in a nutshell: you can see that gold performed very well and that stocks did not. In fact, stocks delivered a negative return.


....read the other 3/4 commentary HERE

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