MoneyWeek roundup: The trade of the next decade

John Stepek rounds up of some the week's news and views that you may have missed, including Bill Bonner's 'trade of the decade' - and what's best in the shorter term.

John Stepek rounds up of some the week's news and views that you may have missed, including Bill Bonner's 'trade of the decade' - and what's best in the shorter term.

Our publisher Bill Bonner released his new Trade of the Decade this week. Bill's last big call, in 2000, was to sell stocks and buy gold. It was a good trade as we point out in MoneyWeek magazine this week, $100 invested in gold around the start of the century would have turned into nearly $400, whereas $100 put into the S&P 500 would now be worth around $80.

So what's his latest take? Sell US Treasuries, and buy Japanese stocks. There are plenty of reasons behind Bill's views you can read them here but ultimately, it's because one's very expensive and the other is very cheap. US Treasuries have been in a 27-year bull market, says Bill, while Japanese stocks have suffered a 20-year bear market. Which will be higher and which will be lower in a decade's time? Looking at it that way, the trade seems pretty secure. MoneyWeek editor-in-chief Merryn Somerset Webb gives her view and her own trades of the decade in this week's magazine.

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Trades of the decade are all very well of course. But what's the best bet for shorter-term investors? Tim Price knows what he likes. "Defensive value stocks." Companies that can continue to grow and generate profits, even in the absence of wider economic growth, are "the single most attractive asset class in the market right now," he says. Tim holds plenty of these in his Price Report portfolio. Why? Because if markets fall, they'll hold their value better than other stocks. And even if there's no new crash this year, then "value investors can sit back and enjoy the dividend yields."

Oh, in case you're wondering, Bill hasn't ditched gold. He's sticking with it. But as both Tim and Dominic Frisby, our gold expert, point out (see: What's next for the gold price?), this'll be a turbulent year, and gold is unlikely to escape. Gold could even lose most of the gains it made in 2009, particularly if interest rates rise, reckons Tim. But if it does, he plans to buy more. With plenty of reasons to be fretting about government finances and potential currency crises, gold is the best "alternative currency" around.

Political risk in general will be a big issue this year, as I pointed out in yesterday's Money Morning. We've had Iceland's president shock everyone by telling Britain to sing for its supper. We've had sterling rattled by another unsuccessful attempt to knock Gordon Brown off his perch.

Yet people are still too complacent, reckons ex-City fund manager Riccardo Marzi. Riccardo was back in Italy over Christmas. Here's what he found: "The local media and the people living there seemed totally unaware of the economic crisis. Not one news bulletin mentioned it, and it never came up in conversation. The people seem to be living in denial. The political class is offering only populist measures designed to keep people happy no talk of serious reform is ever mentioned.

"Italy's GDP has shrunk by around 5% and its budget deficit has grown to more than 5% of GDP. Meanwhile the country's low-tech industries have been ravaged by Chinese competition. Yet no one seemed to care." What does this complacency which is by no means restricted to Italy - mean for the eurozone? And more importantly, the euro? Well, as Riccardo put it in his Events Trader newsletter, "it's a recipe for disaster so let's stay tuned and try to profit!"

Stock market investors are overly complacent too, reckons Paul Hill. Now Paul's by no means a 'glass-half-empty' sort of guy. I'd go so far as to say that he's one of the more bullish of our writers. Yet even he thinks the market got carried away last year. "Even if we assume interest rates stay low, that the worst of the bank bailouts are over, and that there are no mega disasters like a currency crisis on the horizon", there's just no way that corporate earnings can meet analysts' hopes for 36% growth in the year ahead. Paul expects the FTSE 100 to end the year at around 4,500. The good news is, as Paul told readers of his Precision Guided Investments newsletter last week, that this "will throw up a host of new buying opportunities."

Oh, and ever wondered why you feel so poor even though you earn more than the average person? Merryn, writing on the MoneyWeek blog, thinks she has the answer tax dodging. But, asked one reader, can you blame the tax dodgers? "As taxation increases in any society to exorbitant levels, then intelligent people seek ways to escape being openly robbed of the wealth they created This is especially true where the ruling class directs so much of the fiscal proceeds to their own personal benefit... Thieves versus evaders. It is an eternal battle, without ethical righteousness objectively ascribed to either side." Of course, that unfortunately leaves those of us who'd prefer to live honest lives being robbed on both sides

John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.