Deflation dominating, dividing returns by volatility is key

The concept of risk-adjusted returns is so rarely mentioned by finance types and yet the concept is so critical to real life assessments. Holding on to over-valued, over-bought risk assets in a world of unprecedented leverage is like trying to ride a bucking broncho to work. With a lot of luck, there is a small chance you might get there in one piece, but the more likely result is that you will suffer serious, perhaps permanent injury. Given the grave stakes at risk with one’s life savings, even if one in a million riders manages to hang on through an extremely volatile ride, the question remains, is it a wise method to chose for rational people?

Bob Janjuah, co-head of cross-asset allocation strategy at Nomura, says he expects Italian and Spanish 10-year bond yields to fall to 1 percent, adding that fixed income is “the place to be” rather than equities” in a world dominated by deflation.

Here is a direct video link.

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