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Charles Lewis Sizemore, CFA

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  • Why Bonds Are Most Certainly Not in a Bubble [View article]
    Jeff, that was a good article. Thanks for passing that on. But as you yourself say in the article, greed is a major force driving a bubble. In an earlier comment, I referred to it as the "get rich quick" mentality. In the Treasury market, I don't see a greed motive as much as I see fear and disgust in everything else.

    Again, I think Treasuries are a horrible investment at current yields. I'd rather just stay in cash than allocate my funds to Treasuries, if those were my only two options.

    But lumping today's Treasury market with past bubbles like the Tulipmania or South Sea Bubble or more modern variants like the Nasdaq and housing bubbles would seem like a bad fit.

    The only asset that would appear to be a bubble to me at the moment might be gold But even gold's price appreciation would seem to be driven more by fear than greed.

    We're living through a market that is, alas, hard to define...
    Aug 22 01:29 PM | Likes Like |Link to Comment
  • Why Bonds Are Most Certainly Not in a Bubble [View article]
    Jeff, no one is going to argue with a straight face that bonds are a "good" investment right now. I don't believe the people and institutions buying them think that at all. There is no enthusiasm here. But just because bonds are a lousy investment at current prices, that does not automatically mean they are in a bubble. In a true bubble, you have that "get rich quick" mentality, and that clearly does not exist in the bond market right now.

    Will investors buying 10 and 30 year Treasuries lose money on these investments, particularly in real terms? Probably. But that does not make this a "bubble" if we are going to stick to the definition of the word.

    Sorry, I'm anal retentive and like to split hairs.
    Aug 21 11:28 AM | Likes Like |Link to Comment
  • Why Bonds Are Most Certainly Not in a Bubble [View article]
    A lot of you really missed the author's point. Bonds are not a "bubble" per se, because, as the author states, "for a bubble to actually be a bubble there must be some emotive level of enthusiasm that drives prices skyward."

    Read any good book on bubbles (Devil Take the Hindmost, Extraordinary Popular Delusions and the Madness of Crowds, etc) and you will see that the action in the bond market hardly qualifies.

    No one buying US bonds LIKES them or expects to see high returns from them. They are buying them for precisely the opposite reason. They see low growth and they see bonds as the lesser of many evils.

    This is not 1999 Nasdaq mania. No one is quitting their day job to day trade the 30-year Treasury. This is not the 2004 condo-flipping mania. No one is moving to South Beach to flip condos.

    This is NOT to say that bonds are a good investment or that I would buy them at these prices. Absolutely not. I wouldn't touch Treasuries with a ten-foot pole at these prices.

    But that is not the point. When we, as financial commentators, toss the word "bubble" around, it muddles the truth and sows the seeds of confusion.

    Bonds at current yields represent a TERRIBLE investment, and one that might lose a lot of money, particularly in real terms. But they are NOT a bubble.
    Aug 21 11:22 AM | 2 Likes Like |Link to Comment
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