Bubble in Bonds?

I’ve been hearing from a lot of people saying that the bond market is the next bubble to burst. For the most part I’m a stock and options trader but a chart is a chart and if bonds are truly in a bubble then the long term chart should reflect bubble characteristics. Let’s look at a long term chart of $USB and compare it to (POT) which is an agriculture stock that was clearly a bubble that needed to burst last year.

As of right now I don’t really see a bubble as I do see a strong momentum chart. Yes there has been a strong bull market in bonds for quite a long time, however for this to go on some type of climax run this will be well into the 200’s before that is even an option, possibly 300’s.

Ways to play this are (TLT), (IEF), and (SHY).

POT is the true definition of a bubble going from low single digits to the mid 200’s in the span of 6 years with most of those gains being realized in about 18 months. It didn’t have a down month from mid 2006 until the end of 2007. Just be aware the next time you hear that bonds are in a bubble and remember that the charts don’t lie.

Comments

[buyitcheap:]

You're paying 140 for a 100 asset. That's a bubble, at worst its a bubble in the making.

2008 Dec 22 09:48 AM

[User 143167:]

In 200's or 300"s? That is equivalent to predict that 30y bond yield could go negative. Seems to me that madness never ends, can bond price go up unlimited like equity does?

2008 Dec 22 10:50 AM

[Larry House:]

I agree with "a bubble in the making," but it isn't there yet.

2008 Dec 22 11:52 AM

[igggy:]

Since the government has an unlimited supply of treasuries, the bubble can burst at any moment if they suddenly need to sell more bonds than usual. That's the difference from stocks and commodities.

2008 Dec 22 04:47 PM

[waterlily57:]

If it really is a bubble and it bursts, where would all the money stampede to? Any ideas anyone?

2008 Dec 22 08:21 PM

[Lin:]

waterlilly57

It will stampede into gold/silver when the bond bubble bursts , taking out trillions more in paper wealth


On Dec 22 08:21 PM waterlily57 wrote:

> If it really is a bubble and it bursts, where would all the money
> stampede to? Any ideas anyone?

2008 Dec 22 11:26 PM

[jaytaredr:]

LOL.. i have heard it all now. you cannot compare the TLT to a speculative stock like POT. Give me a break man. The TLT going up to 200 in my mind is absurd. Serioulsy is it goig to get that much worse.. the news is out there... buy the rumor sell the fact.. WHEN THE BOND BUBBLE DOES BURST.... ALL THE MONEY WILL GO INTO EQUITIES..solid ones with dividends.. and currency that pays overnight interest..DUH... where did all the money go that went out of equities? look at the TLT and look at bonds. sure as heck was not GOLD now was it. Money leaves bonds for stocks and vice versa. No offense to the author of this article, but a chart of your ekg should not be compared to your ECG! thats brain versus heart activity. Compare different colored apples, but don't comapre apples and bananas. Just my ten cents.. becasue it's worth 5 x as much as 2!

2008 Dec 23 01:53 AM

[Hmm?!:]

The problem is around the definintion of bubble. For bonds I will consider this a bubble.

I cannot see how it could get much higher. Especially since the dollar appears to be retracing recent gains already. But then again many believe, including myself, that the dollar should have started imploding long ago.

2008 Dec 23 12:20 PM

[kurt walter:]

My pick: ProShares UltraShort 20+ Year U.S. government bond (TBT)

2008 Dec 23 01:37 PM

[jaytaredr:]

whoops.. do not compare..EEG to EKG!! my mistake..
boilerroomtrade.com iks my electrronic trade journal


On Dec 23 01:53 AM jaytader wrote:

> LOL.. i have heard it all now. you cannot compare the TLT to a speculative
> stock like POT. Give me a break man. The TLT going up to 200 in my
> mind is absurd. Serioulsy is it goig to get that much worse.. the
> news is out there... buy the rumor sell the fact.. WHEN THE BOND
> BUBBLE DOES BURST.... ALL THE MONEY WILL GO INTO EQUITIES..solid
> ones with dividends.. and currency that pays overnight interest..DUH...
> where did all the money go that went out of equities? look at the
> TLT and look at bonds. sure as heck was not GOLD now was it. Money
> leaves bonds for stocks and vice versa. No offense to the author
> of this article, but a chart of your ekg should not be compared to
> your ECG! thats brain versus heart activity. Compare different colored
> apples, but don't comapre apples and bananas. Just my ten cents..
> becasue it's worth 5 x as much as 2!

2008 Dec 23 01:43 PM

[jaytaredr:]

completley agree..buy the TBT and you will be buying diamonds by the end of january!


On Dec 23 01:37 PM kurt walter wrote:

> My pick: ProShares UltraShort 20+ Year U.S. government bond (TBT)

2008 Dec 23 01:44 PM