Long Duration Bonds Are Biting Back

| About: PIMCO 3-7 (FIVZ)

"Nobody could have seen it coming" - I can already hear the cries....

Sept. 13 (Bloomberg) -- Investors who snapped up the biggest supply of long-maturity bonds since March last month are being punished as interest rates climb on diminished concerns the U.S. will relapse into recession.

There's no way to win when you buy a top. And a lot of people did, piling into the long end of the curve. It was an idiotic move. Stupid beyond words, really. But it didn't stop anyone.

Why would you loan IBM money for a couple of years at 1%? The Federal Government for 10 years at 2.4%? You're nuts.

But people did it, and now the longer duration on that paper is starting to bite back. This is likely to accelerate.

There's no way to win this game. If the economy "recovers" you get creamed. If it doesn't and default risk comes to the fore, you really get creamed.

Everyone thought that "buy this and you'll get principal back" was a safe bet. No, it's not. Bond prices do move, and the "you'll get principal back" is a relative thing. Sure, you'll get the $10,000 back, but what does that $10,000 buy?

If you want out early, that's when the pain really begins.

I don't get people. I especially don't get the monkeys on places like CNBS, that claim "oh as long as people want to buy there's no bubble." Uh huh. How did that work out for home buyers in 2006?

Are you going to cover these people's losses CNBC? Of course not. Nor will the so-called "experts" that you paraded on your shows. Nor will anyone else.

Not that any of these buyers deserve to have them covered. You have to be a 5-alarm idiot to buy anything at historic highs, especially when there's only another point or so you can capture on the downside in yield before you intercept zero!

Bernanke deserves to be fired and run out of town on a rail for his distortion of this market. He has done his level damndest to drive people out the risk curve and pander to Geithner and Obama's spending insanity at the same time. Whether it be duration risk or equity risk, that's the name of his game - make people take it, or lose. It must be nice to have the ability to point guns at people's heads in the figurative sense, and never answer for your bubble-blowing insanity.

Why the people of this nation put up with this crap - after being financially gang-raped twice in ten years - is beyond me.

But here it is, and here it comes. Either way if you're out the duration curve you're screwed. If it starts to unwind for any reason you will find the door small, and the crowd large.

Just like in houses.

Just like in stocks.

And now, just like in long-duration bonds.

Here comes the fun, and those of you who get trapped deserve what you get - you sure as hell had plenty of warning over the last 10 years that this was just another manipulated game.