Bond Bubble Looming, where does it end?

We have been talking about this for a while (28/01/09, 11/03/09, 23/04/09), it was a popular topic on this blog in 2009 but well covered and for that reason we have not revisited it much, but the alignment of the stars warrants a look at the symptoms of the disease because now they are ever more present than before. At this point we can see a clearer path; which is still leading to a bond bust destination.

It has also becoming a mainstream topic, recently it showed up in an article titled ‘Currency, the weapon of choice in a world of lower demand‘.

If something can’t happen it won’t, and what can’t happen is a world in which we see century bonds (bonds with 100yr terms) becoming commonplace, they will probably be (as is the benefit with all hindsight) the poster-boy of the …

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Treasury outlook, what to expect on the bond market

Charles Diebel of Nomura Internation on his outlook on the treasuries. There has been talk for some time of a treasury bond bubble forming, the scope and depth of this can only be expressed over time, however, the money that has flown out of equities and property must have flown somewhere and perhaps the treasury ‘flight to quality’ is actually going to be the stimulus that caused the treasury bubble to form (if there is one).  The talk of inflation – according to Mr. Diebel- is more of a 2010 story than one of 2009, however, as per our comments in the past, if you are considering a fixed rate mortgage you will have to do so ahead of the curve in order to gain an upperhand on inflation.

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Where will the rent takers hide next?

Taking rent is perhaps the best and yet most unproductive part of an economy, in the past we have spoken about the concept of ‘rent taking’ regarding economic bubbles and the effects of same. The last few years have seen rent takers jumping from one resource to the next in search of a good place to rest.

In the dotcom boom the rent taking was in the real estate of cyberspace, buying ‘probable’ names and sitting on them was popular until it proved to be a pointless exercise as companies found other ways around the problem, in some cases (such as 20th Century Fox re-branding because somebody bought etc.).

After that the low rates and capital gains to be found in housing caused the next boom bust, it is fair to say that it was the land owners (the original rent takers) who did the best in this scenario. In any case the money left housing from 2005 onwards (for instance Berkely group sold off half of their 26,000 land …

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