“[T]here are serious problems with our money system. You can either solve them in the way governments have solved them in the past, which is inflating away the debt, which is a huge quality of life issue for people right now on fixed incomes whose costs have gone up, whose rent has gone up, whose fuel has gone up, whose energy costs, whose food. That's happening now.”
~ Dan Denning, Publisher, Bonner Private Research
TRANSCRIPT
Joel Bowman:
I'm Joel Bowman for the Fatal Conceits podcast, a show about money, markets, manias, and mobs, and I'm joined by Mr. Dan Denning, who we haven't heard from for a little while, who's been hanging out up in the high plains of Laramie, Wyoming. Welcome to the show, Dan.
Dan Denning:
Hi, Joel. Yeah, winter's nearly over. So, I've come out from my hibernation. And I didn't see my shadow, so it's safe to come out.
Joel Bowman:
Right. Mate, I thought we would start just at the top here with the other subject that everybody's talking about and I don't mean Will Smith's inability to take a joke, but the 8% official, let's say, inflation rate. It's the highest that at least has been witnessed in America in the 40 years of my lifetime. But the official rate is probably, or the unofficial rate rather, is probably a bit higher, maybe considerably higher than what most people are being told. What's your read on the ground when you go to the pump and the grocery store and order your frozen steaks?
Dan Denning:
Yeah. Well, anecdotally prices are definitely up. I don't drive, although I recently bought a used car from one of my uncles. So, I timed that probably poorly as a contrarian, where I'm buying-
Joel Bowman:
Mate's rates, I hope.
Dan Denning:
Yeah. So, anecdotally he said the market there is still incredibly tight and it's partly because dealer inventories are low. And I don't know if that's a supply chain issue. But also part of it is that prior to the supply chain issues, if you looked at the financing in the car market for new cars, the company-owned financiers, in addition to the dealers, were offering extremely generous terms with no money down and financing for 48 months or 72 months. And we see that before in all sorts of credit booms, where it brings forward demand. And I think in the car market, it brought forward demand so that there just wasn't a lot of...
Once that hit the supply chain issue, then you saw a real shortage of both used and new cars. So, prices are up. But I just talked to a friend of mine who lives in Spain, in Barcelona. And he said energy prices are through the roof over there, and food prices are up. So, I think the big picture for investors is that the Fed was poorly, poorly mistaken in all of its policy guidance about inflation. So, when it said 2% was the target, and then it was willing to let inflation overshoot until that showed up in the data, and then it did show up in the data and they ignored the data, they missed it. They missed the boat.
And now the problem is, how do you get ahead of rising prices? And we can get into that later if you want, but it's not what the market thinks it is. So, nine rate rises between now and the end of the year is not going to be enough to get in front of inflation. So, the inflation will probably go higher, and it will take a higher policy rate to bring it under control, if the Fed has the stomach for that. Which they don't have the brain for it, and I don't think they have the stomach for it either.
Joel Bowman:
So, as part of the narrative that the Fed either willingly or unwillingly sold to the American public... I asked Bill this question up in Salta just last week and I'm wondering on your take. Were you surprised at the switch in narrative from Chairman Powell's frustration with not having been able to achieve inflation, to watching it tick over the targeted 2%, calling it transitory, then actually it's good for you, and now bizarrely in somewhat of a non sequitur, I think, to many people. Having 8% or generation high inflation positioned as the price we pay for standing shoulder to shoulder with our Ukrainian brethren? I mean, that seems a bit of a stretch, but are people buying into that or is that, do you think, a coverall for them getting away with the kind of shenanigans they wanted to get away with in the beginning?
Dan Denning:
I think part of it is an insular bubble mentality with policy-makers, especially at the monetary level, that they didn't see that quantitative easing itself was inflationary because they saw that it was contained to, really, a kind of antiquated back corner of the financial system about in what form reserves were held. Were they held as cash with banks or were they held as treasury bonds and were they held at the Fed or somewhere else? So, when the Fed expanded its balance sheet prior to 2020 and it was about 4.3 trillion, they said, "Well, that was fine. That didn't cause consumer price inflation. The only inflation that it caused was asset price inflation." And that seemed to be okay for one reason, because the Fed has this theory that the wealth effect, when people have more financial paper net worth, they tend to spend more money. And that actually helps get them to that 2% inflation target. They thought, "Well, that's okay. Rising stock prices produce the wealth effect, which produces 2% consumer price inflation. That's the policy." Also, it turns out that some of those Fed governors may have been front-running their own policy decisions.
Joel Bowman:
No, no, no.
Dan Denning:
So, rising stock prices were great. But then something did appear to change in 2020 when the Fed doubles its balance sheet, roughly, from 4.3 to whatever it is, 8.9 trillion now, in two years. That was inflationary because a lot of the bonds that the Fed bought was money that the government spent on the fiscal side that went directly into consumer pockets. So, this was the Paycheck Protection Program, which turned out to be riddled with fraud. This was the stimulus that was sent to people's pockets. And of course, now you're talking about the government handing out even more money to offset another policy blunder the energy market. But that did clearly turn out to be consumer price inflation, the stimulus and all of the money spent during the pandemic.
And I think the mistake from an academic point of view, which is what the mentality that the Fed governors are locked in, is that they're saying, "Well, that shouldn't produce inflation. It should be fine. It's transitory," which is why they said that. Or, "It's related to interruptions in the supply chain." It didn't occur to them that inflation is a cyclical process and that once it gets underway, also as a psychological process, then something has to break the cycle, and that something is not magically lower gas prices. It's interest rates that are much higher than the rate of inflation. So, we have nominal interest rates that are barely positive right now, but in real terms are still negative. So, if inflation's at 8% and real interest rates are negative 2% and to combat inflation, real interest rates have to be three to 5% higher than the inflation rate, you're looking at real interest rates or nominal interest rates of around 12 to 14% to break the cycle of inflation.
And that is clearly so unfathomable to investors and to policy-makers that they don't know what to do with it. But that's the Fed's own Taylor rule, which says where interest rates need to be to have inflation at 2%, stable prices, and full employment. And if you use that model, depending on the rate of inflation, current interest rates would have to be at least 12% and as high as 21%, depending on what you use as the rate of inflation, to break the cycle of higher prices. And so that's something we're working on right now, Tom and I, to figure out, well, is that possible? If the market were in control of interest rates, where would they be? And then obviously, what do you do with your money in that environment?
You don't want to have your money in cash. You certainly don't want to have it in bonds if interest rates are headed up. So, where can you put it? So, it's a super important question for investors right now. But I think the main point is, the Fed got it wrong, massively, on inflation. And in order for it to get back ahead of the inflation story, it has to do something that it might not be willing to do politically, or might not even have support to do politically.
Joel Bowman:
Right. And that reminds me of the person who's looking at the weather app on their phone saying, "Hey, it's supposed to be 80 degrees out today," while it's snowing on their head. The reality was just in such stark contrast to what their theories were telling them where they had to go. So, the two numbers that you mentioned just then 11-ish% and then maybe up to 21%. I'm assuming the differential there is based on the different methodologies used to calculate CPI from '80s, '90s, and today. I don't know when this Taylor law was first proposed, but I'm assuming it was not taking into account the way that inflation is counted for today. Is that right?
Dan Denning:
Yeah. So, a full explanation of how the Taylor rule is constructed is probably beyond the scope of our discussion, but it was an academic study done retroactively about really what happened in the 1970s and where the Fed went wrong in terms of containing inflation at that time, and then what Paul Volcker had to do to break the cycle of inflation. So, within the rule itself there's a couple of components. One is what the actual rate of inflation is. And that depends on how you calculate it and where it may be in a month or two from now. And the other is what they would call the difference between long term GDP growth, trend growth, and current growth. So, if there's a gap in output, then how do you get that gap back up to trend?
So, there's a couple of different components. But I think for our purposes, the big component to focus on is, what is the actual rate of inflation right now? It's probably higher than 8%. And after we get the official data in from energy prices and their impact on March and April prices, it'll be higher still. And then what Taylor showed from Volcker's experience is that whatever the actual rate of inflation is, you had to add four to six percentage points of interest rates on the difference to circumvent that cycle where it just goes higher. So, you couldn't just match the policy rate with the inflation rate and say, "Okay, well, interest rates should be 9%. If inflation's at 8%, then that means savers earn 1% a year." Normally savers expect to earn between three and 4% over the rate of inflation.
So, if you say the current rate of inflation is actually closer to 12% and savers demand an additional 3% on top of that plus whatever you need to break the cycle where people believe that inflation is ingrained, that's where you get that range of 16 to 21% and saying, there has to be a cushion which savers can start to make money buying government bonds, and then there has to be something on top of that that breaks the cycle. But the main point, I think, is that it doesn't come down naturally once it gets underway. And the only way it comes down is if you either let the market set interest rates, which the Fed is considering doing by not intervening in the bond market the way it has been in the last two years, or by setting the policy rate much higher.
And that's the other thing that was interesting in the last couple weeks or since I spoke to you, that the big result of all this is that if the Fed continues to be so far behind the curve and gets it wrong, what you'll see, and I started writing about this a couple of years ago when I reviewed the Chicago Plan from the 1930s, is you'll see calls from the political sphere of American life to take away the Fed's control of the money and give it to either Congress or the Treasury Department. And in that regard, the Fed floated its proposal for a Central Bank digital currency. But in the last couple months since I've talked to you, someone floated a bill in Congress calling for a digital dollar that's created and managed by the US Treasury, not by the Federal Reserve.
So, instead of a Central Bank digital currency, I would call it a central government digital currency. And it doesn't have any of the features of cryptocurrency. There's no distributed ledger. There's no blockchain. It's really just like an electronic credit card from the government or an application on your phone where the government debits money into your account to spend. And to me, that's the political response to the Fed's policy errors, saying, "Fine. If you guys can't control inflation or produce stable employment or full employment and stable currency, then you're failing in your dual mandate and we'll just take control of the money system from you and we'll do it ourselves." So, I think that's an issue-
Joel Bowman:
What could go wrong?
Dan Denning:
Yeah. Well, what it means is what we've said, is that there are serious problems with our money system. You can either solve them in the way governments have solved them in the past, which is inflating away the debt, which is a huge quality of life issue for people right now on fixed incomes whose costs have gone up, whose rent has gone up, whose fuel has gone up, whose energy costs, whose food. That's happened now. That's not a future thing. If you're on a fixed income and you're getting negative interest on your savings after you include inflation, your cost of living's gone up. So, the issue is, where does it end? And it ends in either a massive, further depreciation in the dollar, or it ends up in a new kind of currency. And that's why we're having conversations about Central Bank digital currency or now central government digital currency.
Joel Bowman:
So, let's follow that thread just a little bit further and imagine, indeed, that Congress wags its tut-tut-ing finger at the Fed and says, "You've failed in pretending to curb inflation and you've failed in pretending to safeguard full employment. Your time's up. Now, we're going to pretend to do these things on behalf of those we effect to serve." Let's imagine that, indeed, a CGDC, a central government digital currency, does indeed come into effect. Given the recent backdrop of the weaponization of foreign assets or foreign currency assets or the ease at which money or donations were confiscated, which we saw up in Canada with the whole GoFundMe debacle, what do you foresee in this kind of Orwellian in future where the government may well have the power to, for one reason or another, turn off your access to its permission-based money? I know this is something you've read and thought about a lot.
Dan Denning:
Yeah. I think it's on track. I should qualify it and say the bill that was introduced in Congress, it's still in committee. So, it doesn't guarantee that it's going to get out of committee. And it's not likely, I think, to get passed by either the House or certainly the Senate before the midterm elections later this year. So, what it called for is several pilot programs to be implemented within 90 days passage of the bill that would test a central government digital currency as either a debit card, which apparently they have in the military. I think it's called EagleCash. So, it's a preloaded card or it's a card that has a pin number. And the reason they want that is it's compatible with the way most people who are in the banking system now get their money.
It's just a new card with a new pin number and the entity on the other side is the government, rather than a private bank. The other pilot program calls for it to be used on your phone. And they figure that between debit cards or credit cards and phones, that covers the vast majority of people who have a bank account right now. And even those who don't have a bank account, they could be brought into the financial system that way. So, as a pilot program, in theory, it's compatible with the existing financial infrastructure and architecture to test. So, it doesn't require a brand new development in technology or a lot of development time. I still think it's unlikely that it'll happen before the midterms, but to me that's not the reason to dismiss it. The reason to think is that it's going to happen eventually anyways, that it gives the Congress, whoever's in control of the Congress, a lot more control over money.
So, we don't talk about it, but I'll talk about it briefly. In the budget that was recently passed, which wasn't really a budget, it was a 1.5 trillion funding bill, they reintroduced earmarks, or pork barreling as it used to be called, where Congressman or Senators could fund projects in their district that directly benefited their constituents. And it was just a wink, wink thing that if you do that, I'll let you do this. And so hundreds of billions of dollars of spending end up back in someone's congressional district because someone slipped it into the government bill.
I think that when you look at the trend with this central government digital currency, it's kind of a way of earmarking spending based on a couple of things. Probably based on net worth, perhaps political party affiliation, or perhaps, in the most dystopian view, your political views as expressed on social media and as monitored by a social credit score. So, for example, at the top end, people who have most of their net worth tied up in financial assets, they're not affected by inflation. And by the way, this is why the Fed was surprised with inflation being higher than they expected, because their cost of living doesn't matter to them, you know?
Joel Bowman:
Right.
Dan Denning:
They don't spend as much money on food and fuel. So, they just didn't notice that the way-
Joel Bowman:
As a percentage. Yeah.
Dan Denning:
Yeah. The middle class did notice it. But you've already seen with the discussions on taxing unrealized capital gains or taxing net worth, things like that, that at the top end, a central government digital currency doesn't affect you because it's not pocket money. It's not a pocketbook issue for wealthy people. It is an issue for the middle class and people who are net recipients of government benefits. And the point is for the middle class, your access to money will be controlled. On what basis we don't know. That's the issue. Will it be based on how much you should be spending or whether you're saving too much? Are you hoarding your savings? Whereas you could be doing your part to help the economy by spending more money. So, if you have more than $100,00 in savings in a FDIC insured account, they may tax those savings or impose a negative interest rate.
Joel Bowman:
That's unpatriotic.
Dan Denning:
Yeah. Or say, "Look, if you don't spend it, the money expires." And there are systems in the past where the money was timed. So, they said-
Joel Bowman:
Like a time decay.
Dan Denning:
Yeah. "Spend it or lose it." Yeah. And then the other issue with people who don't have money is to say, Hey, "If you're on social security disability, if you're on social security Medicare or Medicaid, or unemployment, we will send you money but only if you agree to have it downloaded and monitored on your phone, or it comes pre-installed on this piece of plastic. And then in that case, you can't spend it on things which are prohibited." So, your receipt of government benefits is dependent on our permission. So, to me that seems like either party of Congress would be capable of saying, "Yeah, we'd be happy to have a lot more control over who gets to spend money and how much they get to spend."
The real issue is why would the bankers willingly surrender their control of the monetary system that they have now through the Fed? They wouldn't willingly do it. And we know that they're huge contributors politically to the people that get elected to Congress. So, it's a very powerful lobby that's going to want to preserve its position of privilege in the money system, but they are now directly opposed philosophically by people who say, "You failed. You're just a bunch of rich bankers anyway. Why don't we have a money system that works," quote-unquote, 'for the people' and is run by the people?" And that's probably going to be how this issue is framed in the next year or two as a political issue.
Joel Bowman:
And it does seem like something that you and I have been talking about for, goodness, the past 18 months, maybe longer, that I don't think you necessarily have to be conspiratorially inclined to put the left foot in front of the right foot and say that these events, whether it be plague or pestilence or the COVID or even the latest great cause du jour in Eastern Europe, that these tend to be catalyzing events for trends that were really already underway. And we've seen this usurpation of power away from the individual into the hands of the state in many other realms and aspects of life. It would seem to make sense that the financial would follow on from there. So, getting down to where rubber meets the road here, what does that mean for you when you and Tom sit down and look at the strategic allocation for the Bonner Private Research portfolio, when you try and work out what your allocation to cash versus stocks versus gold hard assets, for example? How do you play that out in the next, let's say, near to medium term future with balancing those competing forces on the horizon?
Dan Denning:
Yeah, that's a great question. I mean, we released, in early March, the last of the three major reports that we wanted to produce for new subscribers. So, the first was Tom's Gold Report, which explained the relationship between the financial assets measured by the Dow Jones Industrials in real money measured by gold. So, it's the Dow in gold terms. And that gives people probably the broadest understanding of what we think is going on within the stock market relative to gold. So, two decisions there on how much to own of each asset. Then we introduced our Trade of the Decade, which is an inflation-based energy trade. And that's another pillar of our strategy, not just for this year, but for the next 10 years, at least we hope. And then the third was, generally we'd call it an asset allocation strategy, but we just called it the Strategy Report. Which is to say, when you look at these big piles of money in different asset classes, how much should you have in each based on our macroeconomic forecast for inflation and based on the last 10 years of performance for each of those asset classes.
So, it's not an exact science, but there is a lot of data which shows how different asset classes perform in different macroeconomic environments. So, gold, stocks, cash, and bonds in a high inflation, low growth environment, or a low inflation, high growth environment, that you can look back and see what's happened. But the standard disclaimer is past performance doesn't guarantee future results. But where we started the year was with a very high allocation to cash, no allocation whatsoever to fixed income or bonds, and then a mixed allocation to equities and hard assets. And it gets a little bit more complicated because most people don't have crude oil stored in their backyard or soybeans in their garage. When you talk about getting exposure to rising commodity prices, there's only a few ways you can do it.
You can do it through the futures markets, which is a financial instrument that benefits from real price rises. But as we saw with what happened on the London Metal Exchange when the nickel trade was suspended for two days because the nickel price just went through the moon, financial speculation on real assets doesn't always equate to profit. You can get the decision right and still not make money. But you can also buy equities. You can buy commodity producers. But then you're buying an equity, which is a different asset class and, as we know in the past, when there's a bear market in stocks, which is what we think there is right now, we think we're in the middle of a very vicious bull market rally within a long term bear market, stocks as an asset class go down in a bear market.
So, you might own something you think which is really high quality. This is the point Chris Mayer made in the conversation you and I had with him about a month ago, is even the highest quality stocks that have great earnings and very little debt and very high returns on equity or high returns on capital, when liquidity leaves the stock market, if it's a liquidity-driven bear market, it affects everybody. So, stocks as a way to hide from a bear market, high quality commodity stocks, aren't necessarily safe in a bear market. You've got to measure and understand the risk there. On the other hand, Tom has made a really good point that buying shares in high quality businesses that grow earnings and have some particular catalyst that's driving their earnings, whether that's a supply shortage or demand growth, it varies from business to business or industry to industry, but you can find sectors or pockets of value or pockets of out-performance that I would describe as more tactical trades.
And that's why we don't include them as the Trade of the Decade. So, our goal this year is to reduce the allocation to cash, increase the allocation to equities and real assets, by wherever the best opportunity is, whether it's a financial trade or it's an equity trade. But the bottom line is, and I mean this from a large-term perspective, if you look at interest rates going back 700 years, and you look at what's called the risk-free rate on whatever was considered the soundest, most credit-worthy government, the risk-free rate has been going down for 700 years, since Venice in the Middle Ages. And what we're talking about is a fundamental change to a very long-term trend. So, not even the 50 year trend in the US dollar, but interest rates that have been going down in the United States for 40 years, which resulted in a 40-year bull market in bonds and equities.
If that's the kind of change we're talking about right now, then whatever your strategy is, it has to account for that. And that's what we're trying to account for, but it's a really, really big subject. And we think that most conventional advice on that continues to have way too many equities, hasn't really figured in what would happen to the bond market if interest rates went up by 10 to 15%, and hasn't put any thought into what alternative assets or hard assets are the best place of refuge if you're reducing your allocation to those other classes. So, I'm kind of happy that we're in, again, a really contrarian, outlandish position. But on the other hand, there's no such thing as a risk-free position anymore. And particularly with cash, given the inflation rate and the trends in the banking and financial sector to redefining what money is, our goal is to reduce our cash allocation by the end of the year, hopefully by the middle of the year, if we can.
Joel Bowman:
Yeah. It is a huge challenge, as you said. It does seem like the world is awash in what we might call return-free risk at present. So, the bringing forward from the Medici's onward, I'll bring just wrap us up with a quick update on how your Trade of the Decade is going. For those who are just joining us now, it's probably generally defined as long old-school hydrocarbon energy. And by virtue of the flip side of that would be to short US dollar. So, how are we going, what, a year into this? When was it first made public? I guess it would've been around the winter catastrophe.
Dan Denning:
It was over a year ago. So, it was January of 2021 with our previous publisher. But I think in the context of what's happened recently, the most frequent question I get from new readers is, "Have I missed the trade?" Because it's up. So, it's up around 100%, which if it were a short-term trade, we might very well just close it out and look at reentering it at a lower price. But it's not a short-term trade. So, the point I would make to new readers and the point Tom and I have tried to make to all new readers when they're trying to evaluate how to incorporate our research and coverage into their own financial plan is, we will explain to you what we think could happen and what the trade is designed to do, and then you've got to decide how to manage that with your own plans.
In this particular instance, in the last week we've had the Biden administration announce that it's going to release a million barrels a day from the Strategic Petroleum Reserve for the next six months to try and mitigate, presumably, the effects of cutting off Russian imports. And obviously going into the summer, the driving season and into the midterms, to try and bring down the price of gasoline so that people aren't upset when they go to the voting booth. None of that will matter at all to our trade. The two key points of that trade were that you had 10 years of under-capital investment in oil and gas, which has led to a deficit of supply which cannot be easily made up. So, it's not like flipping on the light switch.
So, the other component would be that demand is going to rise. And the financial component was that these investments, excuse me, performed so poorly for the previous 10 years that from a cyclical point of view and a sectoral point of view, it was almost like the Dogs of the Dow, but it was like the Dogs of the S&P, that the sector should have a good 10 years. It's not a straight line. So, what we've advised people is, as the oil price corrects from time to time, then look for the price of the trade that we recommended to be more approachable for new investors. But as a long-term trade, I'm not worried. I don't know how big the upside is. When Bill made his successful trade in gold in the 2000s, I think gold was up 420% that decade and the S&P 500 was down 19%.
Of course, those percentages are determined by what the start date is and what the entry date is, and that varies a lot, depending on when you got in. But I'd say for the Trade of the Decade, there's still a lot of upside left because the oil price could go much higher, and the fundamentals in the fossil fuel market favor the old-school oil and gas companies. For Tom's stuff it's a little bit different, but I would remind people that Tom's ideas are designed to be shorter term and tactical. So, if you've missed something like the tanker trade or the shipping stocks, Tom will tell you what the risk is. He'll tell you where the stop losses are. But he'll also tell you not to chase the trade. The whole point of having a subscription to what we're doing is that we're researching new stuff every month.
And although some of the ideas are long-term, Tom's entire job is to come up with new ideas. So, we don't want people to come in and look and see what they missed out on, although we want them to evaluate the quality of the research and decide, "Are they right? Did it work? Could I have made money?" But there's no FOMO in our service. We don't want people to be focused on past gains. We want them to be focused on future opportunities and also future risks. So, we try to do our best. Tom writes every Wednesday and I write every Friday. So, we try to, as new readers come in, we try to bring them up to speed on where we stand with outstanding positions. But the main focus is, what are we going to do going forward?
And what are we going to do? What will the world look like in two years, and what should we be doing now to be in the right place for that world? So, it's exciting, but it's extremely challenging for everybody. And investors have different timeframes too. That's the other thing we've got to keep in mind is, I think for your six year old, she might be in a really good position to buy stocks at incredible low prices by the time this bear market is over. So, for her, it'll be the opportunity of a lifetime. But for her grandparents, it's a clear and present danger to the value of their retirement. So, how you view the current situation depends on your perspective. And we try to incorporate that when we comment on it as well.
Joel Bowman:
Yeah. It is, without torturing a much overused word, it is somewhat of a holistic approach that you guys are taking, both with regards to near-term tactical trades, but also balancing that out with longer term macro observations which, in the case of the Trade of the Decade, will unfold over, I guess we've got a good nine years of upside, let's say, to go on that one. So, for listeners and readers, just to recap, Dan writes to our paid Bonner Private Research subscribers every Friday and he'll be updating in, depending when this goes out, a couple of days. Tom writes to our readers every Wednesday, updating the positions that he has in the Bonner Private Research portfolio, including, as Dan mentioned, strike prices, a little risk profile or figure that he gives those particular equities, and some commentary along those lines along the way. So, I think maybe we'll leave it there, Dan, and let you return to the windy chills and climes of Laramie. I'm going to head out for a steak lunch myself down here and we'll catch up against soon.
Dan Denning:
All right, Joel. Thanks very much.
Joel Bowman:
Cheers, Dan. Bye.
Thanks for listening to this episode of the Bonner Private Research podcast. Until next week.
Joel Bowman and Dan Denning on Allocation Strategy