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Bonds Are in the Mother of All Bubbles

Andy's picture
Tue, 08/24/2010 - 10:27am -- Andy

Inflation protection vs deflation protection continues to be the debate as investors betting on deflation pile into treasuries (and gold – to protect against default) while inflationist continue to buy equities of all types (and gold – to protect against devaluation). How does it all end? We don’t really know, nor do we really care. All we know is that either pill is a bitter one to swallow.

In the Kudlow report below, Faber and Schiff argue against the purchase of treasuries and that treasuries are in the mother of all bubbles. We share a similar view, though we believe that the bubble can go on for years. Wasn’t it Keynes who said, “The market can remain irrational longer than you can stay solvent?” He got one thing right.

Who in their right mind would loan the government money? It looks like foreigners continue to buy aggressively, perhaps due to currency and economic voodoo manipulation. To us, it’s irrelevant. When everyone is on the same side of the boat (and when foreigners are buying as aggressively as they are), it is only a matter of time until the boat tips over.