Gary Shilling Quotes
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Niccolò Machiavelli said it's better to be feared than to be loved.
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Donald Trump is so unpredictable that foreigners are going to look around and say "boy, we've got to head for the safe havens." And one of the safe havens is Treasurys and another is the dollar.
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Bloomberg TVThe one thing I think is likely to happen under either candidate is massive fiscal stimulus. You have so many voters in Western Europe and North America who've had no real income growth for over 10 years, and they are, in the words of Howard Beale, "Mad as hell and not going to take it anymore."
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OPEC production went from 30 million barrels a day to 33 million. They flooded the market, and it's lost them a lot of money. Look at the Saudis: they just floated a $17.5 billion debt offering, they earlier borrowed $10 billion from a group of international banks; they're selling part of Aramco - they're desperate for money.
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If Hillary Clinton is elected, is she going to be able to jack up taxes with virtually no deductions, and include capital gains? Unless democrats have a clean sweep of Congress, I don't think that's going to happen either.
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We've seen that in the past that where you've had uncertainty, and even where the Fed is raising rates, Treasurys rise as everybody heads for safety.
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One of the things I think is very likely is that with the prospects of robust fiscal stimulus in response to voters mad as hell, the Fed is going to be in there with helicopter money. In other words, they're going to be buying whatever the Treasury issues. They're not going to, in effect, advocate strong fiscal stimulus and then not finance it. And that's helicopter money.
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Let's say Donald Trump wins. Is Congress going to let him build a wall on the Mexican border? I don't think so.
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We're in a pretty tumultuous world, and there's a lot of uncertainty. Treasurys are where people go as one of the few safe havens in the world.
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Despite the recent conviction of many that we're headed back to inflation, I think deflation remains the more likely prospect. You've just got too much excess capacity in the world.
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Treasurys, as low as yields are, are higher than they are in most other developed countries. A foreign investor picks up a yield spread in Treasurys versus their own sovereigns, plus the fact that if the dollar is going to continue rallying - and I think it will because it's a safe haven - then they get a currency translation gain as well.
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Investors aren't willing to accept the idea that we're in an era of lower returns.
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The Fed wants to raise rates because they've been yelling and screaming about it. They've been crying wolf for so long that their credibility is shot, and I think they feel they need to.
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Yes, we're in a protectionist era because when you have lack of domestic growth, everybody tries to unload the problem on foreigners with protectionism, devaluations, cutbacks on imports. But is there going to be a dramatic change? TPP is dead anyway, and similar deals in the eurozone are going nowhere.
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Treasurys, as low as yields are, are higher than they are in most other developed countries.
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If someone loves you, they can fall out of love with you but they're probably going to keep fearing you. That's where we are with Donald Trump.
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If you look back historically at the post-WWII period on average, if you get a 100-basis-point increase in Fed funds, the spillover to the ten-year is only 35 basis points, and 25 basis points into the 30-year - it's a fairly small spillover effect.
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I said earlier 2015 year that I thought we'd get to 10 or 20 bucks per barrel because that's the marginal cost, and when you're in a price war, it's the marginal cost that determines the price.It is a price war because basically the OPEC reason did not cut production in their November 2014 meeting was that they got tired of cutting production and having American frackers and Russians et cetera grab market share.
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TPP is dead anyway, and similar deals in the eurozone are going nowhere.
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A Donald Trump win might be bad for stocks, but it would be very positive for the dollar and Treasurys.