""From a value-focused perspective, the only reason to hold equities here is because their risk-adjusted returns appear likely to exceed bond & T-bill returns at long horizons"
If this does not fit into the "no shit Sherlock" school of investing then I don't know what could. Rates on debt are low and falling, especially relative to (real) inflation.
But, it should also be noted that trailing P/E's of non bank corporations is now at the highest in history except for the dot.com bubble and 9/11 collapse period. Right around 32.5. (overall the forward 12-month P/E ratio for the S&P 500 is 17.0)
P/E is of course the (P)rice you are willing to pay for a share of (E)arnings of a company, and typically through history when making investment decisions you have a choice between debt and the interest that debt pays (renting your money to borrowers) and dividends/capital gains on equities, with the goal of getting the shortest doubling time. Investors who see that doubling time being too long given their risk aversion levels will hold cash, unless they also see inflation as a major future problem, then they are going to go to tangible assets like PM's and real estate as a hedge, but, most see that as a last resort investing option. (Don't yell at me, I know you mostly all see PM's as the only way to go, but then Mish's readers are not typical, we found our way to him BECAUSE we believe all other forms of investment are now junk).
The fact that debt prices are rising in a historic manner even as yield is cratering to an also historic level (negative rates mean we must now not think of doubling time but halving time) means that investors are betting returns on equities will be even worse. Either that or they are irrational, and according to the efficient-market hypothesis (the hypothesis in financial economics that states that asset prices reflect all available information) that is not possible. A person can be irrational, but not an entire market with millions of investors.
Yet, equities are also rising in defiance of an earnings recession underway, and this would indicate that all long-term yield has been abandoned in favor of short-term capital appreciation, something that all the players know is like musical chairs, betting that when the music stops they can beat everyone else to the chairs, a beggar thy neighbor investing plan that is risky in the extreme.
There are very few solutions to the financial spot we are now in, and just hoping things will get organically better without action is the lie so many tell themselves, the harsh reality is that major depressions do happen (1929-41) and so do world wars which cured that example. Basic human needs have not changed, basic human psychology is also the same, technology has improved, but then the stresses of human need for better technology have never been higher as well.
I guess the debate is really between preppers and non preppers. Preppers think they can isolate themselves in a catastrophic collapse and be entirely self sufficient, that the majority is going to die because the government/society can't/won't help them or deliver what is needed to survive. Non preppers say that need itself will force government/society to deliver, ration for the benefit of all.
That is a worthy debate I think. Something to pass the time while we wait for the trigger to the next collapse.