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Wednesday morning October 31st I attended a breakfast put on by Riverview Savings.

You might expect that something on the morning of All Hallows Eve might be a bit frightening, but on this particular morning what we heard was actually more reassuring.

Bill  Ehling Vice president at Federated Investment management flew in to consult with  Riverview Asset Management wealth managers Tuesday at dinner, and still had plenty to share at breakfast.  Ehling is the Fixed Income market strategist at Federated.  He  has been a long term trader in the bond market, and his thesis;  even more than equities, if you pay very close attention  and analyze the data bond markets  can give you very clear insights into the true financial health of a country and it’s economy.

His first pronouncement – which took me by surprise – of the 200 Trillion dollars that makes up the worlds wealth, seventy five (75) per cent is in bonds.  Nations and corporations have used this as a source of financing for centuries .  These markets are huge, they have long histories, and he talked about having researched data back to the founding of the United States.

While the US situation hasn’t been great, it is better than any other countries.

We’ve been growing at about two per cent, which doesn’t increase employment at any significant pace.  If you look at Europe and Japan they’ve been stagnant or have continued to experience job losses.

He referenced the study by Rogoff and Reinhardt the two Harvard economists.  This is the same study that was mentioned in my post Breakfast on West Coast time.  It  is a study of banking crises back several hundred years.  When these  are Systemic as this one was (is) and we will have on going deleveraging for many years, and have a  very slow slog to regain ground.  So there is still work to do.

Another factor that adds drag , we have  a much more diverse global economy. We’re battling “competitors” that even thirty years ago had minimal impact on theUS.  This along with a changing demographic that has many countries experiencing the aging of their populations will provide even more friction to slow our progress down.

However his reading of the markets is slow sluggish growth, not a downturn.


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