Lacy Hunt is the Chief Economist of Hoisington Investment Management. He’s got other credentilas, the essence of which are you need to listen to me.

He spent his time talking about the world’s debt problems, but particularly the U.S.’s. By his reckoning, our ratio of debt:GDP is 350%, and we’re headed toward Japan’s 450%. Since 2000, the U.S. has added 100% to the ratio, while real household incomes are no higher; we’re getting less and less bang for the buck (of leverage.) While the smart people said how fortunate we were to have a Depression expert–in Ben Bernanke–on the job in 2008. Lacy says we needed the expert in 2000, before the debt ramped up.

His solution is austerity. He gave no quarter in a question about whether the Keynesians were right in stimulating the economy in 2008. Well, he conceded that the economy had to be saved, but everything they’ve done since then has been harmful.

With respect to investing, he said that in past periods of overindebtedness, bonds outperformed stocks for 20 years, and he wouldn’t be surprised to see the 20-year period extend longer, given our extreme overindebtedness; therefore, he remains bullish on bonds.

David Rosenberg, Chief Economist and Strategist at the Canadian investment firm, Gluskin Sheff, was the day’s third speaker

He began by talking about his reputation as a perma-bear–at least with repect to equities. Instead, he said his biggest focus is always on risk, as in risk-adjusted returns, thus earning himself the perma-bear moniker. In determining his outlook he looks at the “market’s message.” For example, what does the 3-month Treasury bill’s yield indicate? A market fraught with risk. In contrast, the mid-teens yields of the early ’80s signaled that equity risks were very low. Indeed, he remains very bullish about bonds. He said income is in short supply, and one should own what’s scarce.

He presented a slide showing the factors most correlated with bond yields, and number one on the list was Federal Reserve monetary policy. Thus, with the Fed on hold–with respect to the Federal Funds Rate–he sees a bullish view on bonds as a natural outcome. In response to the argument that bond yields are [too] low, he asks, relative to what? Because relative to the Fed Funds Rate they’re quite high. He expects the long bond to go to 2%, in which case its total return would be 25%. He also likes corporate bonds, where a 5% default rate is priced in instead of the more realistic 2%, which is the current experience.

He isn’t surprised at all that investors continue to favor bonds over stocks, as measured by mutual fund flows. It’s all about demographics, namely the demographics of retiring baby boomers, who need income. They’ve gone from needing capital appreciation to needing capital preservation. With less than 7% of household assets in bonds, he sees room for that to move higher.

In short, his investment motto is safety and income at a reasonable price.

Niall Ferguson, Harvard history professor, lead off the conference with what amounted to a recap of his latest book, Civilization; the West and the Rest. He addressed the issue of whether the West would retain its global leadership, and if that were a question Niall’s answer would have been “no.”

The U.S. has created six–as he called them–”killer apps,” a phrase he used to keep his teenage children engaged in the discussion. The trouble is that, since the late ’70s, the emerging world has downloaded them; China has downloaded five of six. The killer apps are:

1. Competitiveness
2. Innovation
3. Rule of law
4. Medicine
5. Consumption society
6. Work ethic

Regarding competitiveness, he pointed out that since 2004, a measure of global competitveness has seen the U.S.’s competitiveness decline while China’s has increased. In innovation, China and South Korea have developed more patents than Germany. Niall argued that the U.S. has not the rule of law, but the rule of lawyers. He called the Dodd-Frank bill a legal-community job creation law. Honk Kong, for example, exceeds the U.S. in 15 of 15 categories. As an aside, the worst of the countries are Italy and Greece. As evidence of the West’s decline in medical leadership, Niall pointed out the change in life expectancies; Russia’s is greater than Scotland (the country of Niall’s birth); Hong Kong and Japan are ahead of the U.S. In work ethic, the average South Korean works 1000 hours per year more than the average German. “if you go on vacation, the Germans are already there, and when you leave, it’s auf wiedersehn.”

He concluded with six questions he thinks are critical for the future.

1. Can the Rule of Law come to China? If not, it’s not out of the woods.
2. Can India go from an economic tortoise to the hare?
3. Will the Muslim world have a Reformation? Can it separate church and state?
4. Can the West overcome the clash of generations? He argued that the Occupy movement and youth, in general, would be better served in the future by becoming more conservative.
5. Can Africa overcome Malthus? Its population growth threatens to swamp its resources. 43% of population growth in the future will come from Africa.
6. Can the resource curse become a blessing? The history of resource-rich nations is not a good one.

In conclusion, “you need to work on your bow.” 500 years of western dominance is over.

In the Q & A session, session, Niall made a few salient points.

Deflation is the dominant force, at present.
The Euro is not doomed. We won’t see the Lira and Drachma come back. The Europe situation is like the worst soap opera ever.
Regarding the possibility of technology rescuing the U.S., Facebook does not equal the Manhattan Project.