To me and people much smarter than me these Treasury bonds seem more like no-return and all-risk options right now, so it is likely smart to hear someone who sees things differently.
Shilling thinks bonds are the way to go because:
- He admits the bond bull market can’t last forever.
- He only buys Treasuries for appreciation; he doesn’t focus on the yield.
- His target on the 10-year Treasury is 1%.
- He thinks there is another five years of deleveraging ahead of us before we have to worry about inflation killing us.
- Stocks are not the place to be because there is no room for profit margin expansion which has been the key to earnings growth.
- He thinks $80 could be the earnings for the S&P 500 next year which is much lower than the $110 consensus.
- Shilling still thinks there is an excess inventory problem that is going to hold back the housing market.
I think I’d rather bury my money in a tin can in the backyard than buy a 30-year Treasury today, but maybe Shilling is right: