In mid-February, I had the opportunity to listen to a conference call from the provocative DoubleLine CEO Jeffrey Gundlach in which he drew many parallels between today's world and the decline and fall of the Roman Empire.

He talked at length about how the history of currency debasement can be traced back several thousand years. Counterfeiting was a popular activity in those days. Today, it takes 2.5 cents to make a penny and 11 cents to make a nickel.

Labeling our politicians "Republicrats," Gundlach explained that many historians attribute the fall of the Roman Empire to a weak tax system and an overextended military. But in America the biggest problem would appear to be health and Medicare spending, which has doubled in the last decade, right before baby boomers start retiring.

It's not just entitlements that are unsustainable. Ten years ago, federal workers made about two-thirds more than those in the private sector. Now they make twice as much as the people who are paying their salaries. Little wonder the Beltway is not only one of the wealthiest areas in the nation but boasts the strongest housing market.

For all these problems, Gundlach favors the dollar for the present, relying on the best-house-on-a-bad-block logic. The endless focus on Europe's debt woes obscures the tower of debt in Japan that is being downplayed simply because that nation has a huge pool of private savings. 

It's a similar situation in Italy, which must roll over its own mountain of debt in the next two years. Some experts think if senior citizens in Italy continue to purchase their sovereign debt at the pace they historically have, a potential default will be off the table.

The market certainly is betting on that outcome. Gundlach remarked on the dramatic reversal in the investment performance of most asset classes in the first six weeks of 2012. 

In particular fixed income, which performed poorly last year, is shining this year. Only the Nasdaq market has outperformed Italian bonds, Gundlach observed. 

With negative real bond yields, he believes Treasurys make little or no sense unless they are being employed as a temporary hedge. While some are recommending emerging-market bonds, since those nations have much less debt as a percent of GDP, Gundlach isn't. Why? Because if Europe does run into worse trouble, Europeans will cash out and bring the money home.

It's against this backdrop that other fixed-income luminaries like Pimco's Bill Gross and BlackRock's Larry Fink are lining up with virtual perma-bulls like Jeremy Siegel and Byron Wien to advocate equities. What was the song that said the darkest hour is just before dawn?

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