Were the good times of the 1990s just a blip in an otherwise continually downbeat world economy or is the current obsession with recession the way things should really be? The data coming out of the US last week were truly awful - maybe, in some cases, not quite as awful as we'd led ourselves to believe - but in the context of the kind of numbers we'd grown accustomed to, awful enough.
The NAPM index is at its lowest level since February 1991 and showing a 15-month fall in manufacturing. GDP indicated the first quarter of negative growth in eight years. (This is the number that wasn't as dire as everyone had predicted, but it's all relative.)
And it isn't all that surprising that consumer confidence has reported its fourth consecutive monthly fall so that it's at its lowest levels in seven-and-a-half years. How can US consumers, no matter how optimistic they want to be, feel confident about their lives at the moment? People aren't shopping like they used to, and no matter how much George W urges them to get out into the malls and spend, spend, spend, most of them want to stay home right now.
It should be a boom for internet shopping, although I suppose the fear of your new purchase being contaminated by anthrax can restrain you even there.
And it's equally hard to spend when you've just lost your job - unemployment is up 2.2 million in the last year. In my bond days, I remember sitting at the desk and guiltily hoping that a few more people in the almost fully employed US economy would lose their jobs because that would make bonds go up.
As a bond trader, you always wanted to see bonds push ahead - nobody was interested in buying them otherwise. The best times for trading bonds are when economies are in a mess, governments need to raise funds and investors can call the shots. The last few years of robust economies and budget surpluses have been difficult for my bond trading colleagues, many of whom felt they had no option but to defect to the more glamorous (and potentially more profitable) equity desks.
Someone once told me that they liked my column because it had (among other things) explained to them exactly what the long bond was. They then showed me a magazine article that suggested that people who knew what the long bond was were among those least likely to be invited to parties. But now the US Treasury has announced that it will no longer be selling 30-year bonds.
The 30-year maturity was the one known as the long bond and was the most-traded security for US bond dealers. Since I both made and lost money on the long bond in my time, my feelings about its demise are mixed. But US dealers are disappointed, even though they've known for some time that the Treasury was moving towards issuing shorter-dated maturities.
Still, the long bond was a kind of icon for bond dealers - the Holy Grail of government maturities. Stupid as it seems, the 10-year bond just does not have the same cachet.
Anyway, the decision meant the biggest bond rally for years which, hopefully, meant my ex-colleagues had a good few days' trading. And now, since I don't need to know anything at all about the long bond, I'm waiting for those party invites to plop on the mat.
Despite the US decision, bonds of all description have been given a bit of headline treatment lately owing to the decision by Boots to switch its final salary pension scheme completely out of equities and into bonds. The Boots trustees managed to get their hands on some 30-year paper and they intend to hold it until it matures. This means that the only investment decision they need to make between now and then is in reinvesting the income in bonds. The move has made lots of people wonder if they should not do the same thing.
Really, though, that depends on how long you have until retirement. If it's more than 25 years you do have a much better chance of making good returns in equities - despite the fact that they can be savaged from time to time.
It's worth taking the risk for those potentially higher rewards. But if you've only five years to go before hanging up your briefcase forever, there's a compelling argument for the security of bonds. Ask all those Americans who'd hoped to retire early on the back of their equity-laden pension funds, and who have now had to resign themselves to another few years' hard labour.
Of course, funds that have held a high portion of their investments in bonds over the past few years suffered as equities shone and trustees (some of whom I have to say have a regretfully short-term time frame) encouraged fund managers to maximise returns by increasing exposures to runaway equity markets. Now the tables have turned. Every dog has its day, even a bond fund.
As far as Argentina is concerned, however, the dogs are still howling. The Argentinian crisis rumbles on, overshadowed by other world events - but is a nightmare for anyone trading their paper, as well as the government itself. Nobody wants Argentine debt and nobody was impressed by the government's latest plan to cut interest payments by $4 billion (€4.45 billion) a year. This is what's known as restructuring, but could equally be known as default since they're replacing higher interest paying bonds with lower ones and not compensating bond-holders.
Presumably Boots have shunned volatile markets like Argentina and have stuck with AAA paper in order to ensure the payouts to their pension-holders.
With interest rates continuing to fall, bonds are flavour of the month with many investors. You know how much interest you're getting, you know that you'll be repaid at maturity and you know you can sell them if you need the cash in a hurry.
Why aren't they sure-fire winners? Well, issued by governments who consider themselves good credits, they don't exactly pay huge levels of interest in the first place. And, of course, if rates go up and you're left holding a bond paying a fixed rate, you're losing out. But at least you're not losing everything.
