Nassim Nicholas Taleb Says Every Human Should Short US Treasuries

Nassim Nicholas Taleb, the author of Black Swan said today at a conference that "every single human" should bet that US Treasuries will decline. He believes it's a no-brainer based on the policies of the current administration. He provided this strong opinion at a confernece in Moscow today.

He said that as long as Bernanke and Lawrence Summers were behind the economic wheel, investors should bet on a rise in long-term Treasury rates, which move inversely to prices. Thus, he joins a long line of economists and market watchers predicing US Treasury rates will begin to climb shortly.

Of course, I always get nervous when everyone in the crowd says the same thing. Taleb's own book, Black Swan warns against such herd mentality, arguing against using past assumptions to guide future projections, as most analysts do. Taleb believes that major events occur randomly, cannot be predicted, and deviate from models based on past behavior. In other words, past performance is no indicator of future performance.

So, who is to say that growing deficits and debt are going to force rates up? So far, interest rates haven't budged despite record budget deficits. Japan is a good example of defying conventional wisdom. Despite massive budget deficits over the last twenty years, interest rates remain below 1%. In a deflationary economy, you can have massive public debt and low interest rates.

Could this happen in the US? Yes. Could we see a situation where current bond yields look high? It's tough to imagine that happening, but that's exactly the point of Taleb's book. It's the events that you can't imagine, that have such a big impact on the world.