Is the bond bubble about to burst?

drc

There seem to be a lot of doom laden articles all of a sudden saying that the UK bond bubble is about to burst;

http://blogs.telegraph.co.uk/finance/ianmcowie/100022038/bond-bubble-fears-and-why-i-have-taken-the-biggest-bet-of-my-life/

and dare I say it Max Keiser :embarasse and Peter Schiff making some good points about why it is about to burst.

Anyone think this is really likely to happen in the near future i.e. this year?

GeorgeHowell

drc wrote: »

There seem to be a lot of doom laden articles all of a sudden saying that the UK bond bubble is about to burst;

http://blogs.telegraph.co.uk/finance/ianmcowie/100022038/bond-bubble-fears-and-why-i-have-taken-the-biggest-bet-of-my-life/

and dare I say it Max Keiser :embarasse and Peter Schiff making some good points about why it is about to burst.

Anyone think this is really likely to happen in the near future i.e. this year?

I too read that article and the contrarian view regarding switching into equities. All sounds plausible. But then again no doubt a racing journalist could make a very plausible argument as to what will win the 3.30 at Aintree .... doesn't mean that we should bet our shirts on it though !

sabretoothtigger

Theres slightly more detail to go on then the horses. Its a simplier question too, will bills rise more then bonds yield to maturity now, when are like 1% its almost a certain yes

The big idea vs that is uk owes money to uk. inflation cant happen with unemployed people, all true as soon as we soon as we stop importing oil or anything really

We could have said the same of houses. Is it cheaper to rent or to pay 60 years worth of rent to buy a house plus cover all its bills. Renting was cheaper, the prices were inaccurate or a bubble

happen in the near future

makes no sense today, making less sense in future doesnt mean an end then I guess. We'll have to see some of dead end to this progression to then force a reversal

Thrugelmir

With Government bond yields at 2%. Where's the attraction of investing?

sabretoothtigger

To secure costs. Which is more important to pay a tax bill in one country or control a commodity of some type.

The amount of power allocated to some countries government and currency is disproportional to their usefulness. So if they could avoid Japan and just trade outside and around it maybe that'd lead to low demand vs supply of their currency.

The yield is reliant on the currency being more scarce then that 2%. If it was freely available anyway why save it, there is so much debt expiring they'll be more supplied for years to come. It can only be otherwise if demand exceeds supply?

purch

drc wrote: »

and dare I say it Max Keiser :embarasse and Peter Schiff making some good points about why it is about to burst.

Those two morons have been making the same points for years.

Yawn.:eek:

Axion

To be fair many economists have been pushing the bond to equity switch for several years.

My personal view is that there is a bond bubble, but then I also think most equity prices are overpriced as well. Whilst the value of cash is being eroded by the actions of the global central banks perpetuating this vicious cycle of boom & bust.

Cost of living will continue to rise as the value of cash is eroded, whilst the abundance of liquidity pushes asset prices higher without the growth to justify them.

I'm not sure how the world will create the growth necessary to repay the astronomical debt mountain it has accumulated, and more worryingly I don't think our fabled central bankers / politicians know either!

Having said all this however - there are plenty of ebbs and flows to the market giving rise to opportunity. I think there will be further action by the central banks this year, and would see a jump in US treasuries/Bunds/Gilts as an opportunity to buy, rather than signal to switch into equities.

sabretoothtigger

purch wrote: »

Those two morons have been making the same points for years.

Yawn.:eek:

Yea but the scary thing Schiff was always wrong, heres a link from 2002. http://www.youtube.com/watch?feature=player_detailpage&v=U_X6qLBtRTA#t=155s
Wrong for years and years and then he was right. So now again wrong again on USD problems or bond crisis and so on. But similarly I imagine they are again going to be right again in the worst way, years after being dismissed

Kaiser is just bonkers in a funny way. If its any comfort I dont think they get on too well. Celente is similar, skip him but Faber occasionally will give out gems in the noise

I dont advise just listening to the reuters ilk mainstream because its like a herd of sheep, they'll all be wrong together at the same time

Meredith Whitney was right 2007 on citigroup cashflow problems. Badly wrong recently on municipal debt problems, really not a bear as such and maybe it'll be correct eventually. I'd rather listen to people like that then Ben B

padington

Check out this thread ...

http://forums.digitalspy.co.uk/showthread.php?p=63438962

Either we're facing bankruptcy according to money week or a devalued pound, worse pensions and more immigration to combat it.

Jegersmart

drc wrote: »

There seem to be a lot of doom laden articles all of a sudden saying that the UK bond bubble is about to burst;

http://blogs.telegraph.co.uk/finance/ianmcowie/100022038/bond-bubble-fears-and-why-i-have-taken-the-biggest-bet-of-my-life/

and dare I say it Max Keiser :embarasse and Peter Schiff making some good points about why it is about to burst.

Anyone think this is really likely to happen in the near future i.e. this year?

Equities should top out by around March or so, commodities usually top out slightly later and when they do it will probably be quite bearish for bonds of most types. I expect this to happen some time in H2 2013 and would be very wary of holding too much bonds from this time onwards.

I should also add that I expect many developed country equity indices to *take out* the 2009 low before setting up for a new structural bull market in equities for the sometime in 2014 through 2019 period so this may be a very interesting year or two. I will be starting to reduce equities holding at the end of Q1 that are focussed on developed countries with a slightly lower reduction in Asian equities (I expect them to be dragged down significantly but should set a higher low). I will probably keep some of the natural resources funds for a little bit longer into May/June as commodities top out later.

If I look forward to Q3 2013, I expect I will be at least 50% in cash or hedged positions as I set up for the structural bull market that I am expecting to see.

Bonds do not feature in my prognosis because they will probably be entering a bear market, although I am not saying that bonds in general will definitely drop by 40+% or whatever overnight, it is just that I won't be interested in 3-7% income whilst the price drops and there will be better opportunities elsewhere.



imho

J