The Biggest Bubble In History

POP! That’s the sound of the bond market bubble popping! Everyone who thinks their bond investments are safe hedges against the stocks in the other half of their portfolio might be in for a huge and very depressing surprise.┬áThe above chart, courtesy of igold, represents the price of the US 30-year bond. It has gone almost straight up for something like thirty years! Decades of artificially depressed interest rates have pumped up the price of bonds, but can they inflate forever? When interest rates normalize back to their historic average of five to six percent, the value of these bonds will collapse faster than you can say “bailout!”

Do you really want to risk half or more of your principal for a measly 3% return? In the spirit of Mark Twain, you should be less concerned with the return ON your capital and more concerned with the return OF your capital!