The Next Bubble
Over the past 10 years, we have experienced two major bubbles and subsequent crashes. The easy monetary policies of the late 1990s led to the “tech wreck” bubble and crash. Subsequent to that many people ran from the stock market, and with even easier money conditions in place by The Fed, put all their money into the real estate market. The 2006 to present housing crisis is the outcome.
Well, with wounds on both of their knees people ran away from stocks and real estate into “safe” U.S. Treasuries. Because so many people wanted safety, these securities have been bid up. They are overvalued. Their prices make no sense relative to fundamentals.
Let’s look backward – in 1999, did the price of Pets.com make sense relative to the fundamentals? In 2003, did the price of a house in San Francisco make sense relative to fundamentals? No, in any case.
The price of Treasuries has no place to go but down based on the economic environment, the threat of future inflation and the probability of rising interest rates.
You know the sad thing is those same people who bought tech stocks in 1999, houses in 2003 and oil in 2007 are the one buying Treasuries now. They are like a fighter with a “glass jaw” getting ready to be hit by a “heavyweight champion.” Get out of Treasuries before it crashes!!