Treasury bond collapse of 2013?

Last year Peter Schiff made this prediction.

http://www.forbes.com/sites/afontevecchia/2012/03/27/peter-schiff-market-crushing-treasury-collapse-to-hit-around-2013/

Recently investment guru Michael Reese made the same prediction. The stock market is at record highs. Is it foolish to invest in equities right now?

Originally posted by Metal Brain
Last year Peter Schiff made this prediction.

http://www.forbes.com/sites/afontevecchia/2012/03/27/peter-schiff-market-crushing-treasury-collapse-to-hit-around-2013/

Recently investment guru Michael Reese made the same prediction. The stock market is at record highs. Is it foolish to invest in equities right now?

Hard to find any solid investments. Bonds are risky due to historic low interest rates, surely far below unrestricted market rates. When interest rates go up, bond yields go down.

Top of the market investors in equities face great risk, especially given the huge amount of Fed dollars floating around the system, and the massive bad paper still in portfolios.

It may be that direct investment, into specific companies based on their likely success may be the only refuge. That too is risky for individuals who may not have the knowledge or research tools to evaluate individual stocks.

What people don't realize is that when the US dollar is devalued gold and stocks go up, not just gold. When Jim Cramer tells you that gold and stocks go in different directions in the last decade he is a liar! He knows full well it is a lie but he says what he is told by the elitists that butter his bread.

Jim Cramer warns against buying stocks at the top so he can save face while sucking up to the elites that butter his bread. He advises his followers to hold some gold to save face when the stock market tanks. That way he can say he gave you some half way decent advise when those that avoid gold get hammered big time!

Now is the best time to buy gold and silver. Those that keep buying stocks will regret it in a bad way! Debt is still piling up even with the sequester. Equities are a losing game once the treasury bonds tank. You have all been warned!

A high stock market would make treasury bonds more attractive, not less. The US should get its public finances in order, but I don't see any "collapse" on the short term. More risky treasury bonds will collapse first, as investors flee those markets and buy safer bonds instead (like US ones). This is how the yield on many Eurozone bonds dropped because of the Eurozone crisis.

Originally posted by KazetNagorra
A high stock market would make treasury bonds more attractive, not less. The US should get its public finances in order, but I don't see any "collapse" on the short term. More risky treasury bonds will collapse first, as investors flee those markets and buy safer bonds instead (like US ones). This is how the yield on many Eurozone bonds dropped because of the Eurozone crisis.

Buy low not high. Even Jim Cramer says this right now. I don't get you. You are weird. Anybody that listens to you is an idiot.
Gold is the exception because debt levels are so damn high. Congress will not tax to increase revenues or cut spending. It is a no brainer. Get with the program!

Originally posted by Metal Brain
Buy low not high. Even Jim Cramer says this right now. I don't get you. You are weird. Anybody that listens to you is an idiot.
Gold is the exception because debt levels are so damn high. Congress will not tax to increase revenues or cut spending. It is a no brainer. Get with the program!

Stocks are high. If you're not buying stocks, you could buy treasury bonds. Where did I say you should "buy high"? I don't get you. You are weird.

Originally posted by KazetNagorra
Stocks are high. If you're not buying stocks, you could buy treasury bonds. Where did I say you should "buy high"? I don't get you. You are weird.

If you want no return on your investment go for it, weirdo!

http://www.usatoday.com/story/money/markets/2013/01/28/10-year-treasury-2-percent/1870261/

Originally posted by Metal Brain
If you want no return on your investment go for it, weirdo!

http://www.usatoday.com/story/money/markets/2013/01/28/10-year-treasury-2-percent/1870261/

So what was your point again?

Originally posted by KazetNagorra
So what was your point again?

The return for treasury bonds is not much greater than inflation and the official inflation rate is not the real inflation rate. That is why the Working Group on Financial Markets exists, to take advantage of the artificially low inflation rate. Isn't inside information great for the FRS? They can never lose.

Originally posted by Metal Brain
The return for treasury bonds is not much greater than inflation and the official inflation rate is not the real inflation rate. That is why the Working Group on Financial Markets exists, to take advantage of the artificially low inflation rate. Isn't inside information great for the FRS? They can never lose.

You do realize that prior to a bond collapse the yield would go up significantly, right?

Originally posted by normbenign
Hard to find any solid investments. Bonds are risky due to historic low interest rates, surely far below unrestricted market rates. When interest rates go up, bond yields go down.

Top of the market investors in equities face great risk, especially given the huge amount of Fed dollars floating around the system, and the massive bad paper still in port ...[text shortened]... for individuals who may not have the knowledge or research tools to evaluate individual stocks.

No, when interest rates go up bond yields go up with them, not down. The price of bonds goes down, and therefore the price to the issuing party of raising the debt increases. A government may have to raise new debt to pay the principal on old debt, which means that bond yields rising can be bad news. I assume that this is what Peter Schiff has in mind.

The top of the market stock is fine, provided you want income and don't mind paying a high price. If the companies with P/E ratios in excess of 50 can provide dividend growth then the investment isn't so bad. Central bank rates are not likely to come down soon.

Normally a bond sell-off would herald renewed risk appetite from investors, in the current climate they would tend to pump money into the top of the market rather than take on the more risky stocks. Unless the U.S. actually defaults I can't see a bond sell-off happening until there's an asset class to invest in. The interesting question is whether the current regime of high asset prices will become locked in as people expect to pay that much - and if asset price inflation implies there will be commodity price inflation; if so that may explain why the yields on index linkers are negative. The yields on 10 year bonds have dropped to around 1.96% recently, there's not much sign of a sell off yet. Although ETF's have been selling gold recently, which has the same dynamic as a bond sell-off.

The thing with Q.E. is that if everyone else is doing it you have to do it too. Since investors are looking for stocks which are growing their profits, overseas investors will buy shares in a non-Q.E. countries premier stocks removing the profits from the domestic market and driving up asset prices anyway - so everyone is forced into quantitative easing. more or less competitively to keep as much as possible of their premier capital domestic.

Originally posted by KazetNagorra
You do realize that prior to a bond collapse the yield would go up significantly, right?

http://stocks.about.com/od/bonds/a/030910yieldcurve.htm

Originally posted by KazetNagorra
You do realize that prior to a bond collapse the yield would go up significantly, right?

Bonds, particularly those of the Treasury are traditionally "safe havens". Not so at present. Some short term bonds may mitigate risk in equities, but the historically low interest rates tend to leave interest no where to go but up. The only way of keeping them where they are is additional QE, and of course more intentional monetary devaluation. When interest rates rise, bonds at lower rates lose value, so the longer the bond is, the lower the rate, the more risk is involved.

Historically low interest rates, pose the same problem for the investor as historically high valuation of stocks. Stocks may be less risky as there is more room for values to increase than for interest rates to decrease.

Looking at the overall economic picture, it is hardly bullish for either stocks or bonds. The entire world is flooded with debt, and most of the advanced nations are spending at deficit rates, money which can never be repaid. That bubble, when it bursts will make the internet and housing bubbles of the US economies look like popping bubble gum, compared to a nuclear explosion.