Be afraid if you own long term bonds or treasuries. The bond market is getting ready to implode due to Washington’s unquenchable thirst for debt.
Say goodbye to the “good ole days” of high bond income and say hello to higher interest rates and falling bond prices. The bond market is getting ready to get squashed like a fat bug and you don’t want to be nowhere around when that happens.
Why is the bond market crashing and burning? Simple. Washington is running up record budget deficits–$1.6 trillion in 2010– and no one want’s to buy America’s debt-leveraged securities any more. In the last treasury auction, mountains of notes went unsold. The rest of the world has wised up to the fact that the “emperor has no clothes on” and America is no longer the financial super power it once was. Foreign governments and institutions are pulling back from investing in America and that is having a dire impact on the bond prices.
Without the influx of foreign investment, America cannot finance its deficits. That puts more upward pressure on interest rates. As interest rates soar bond prices drop like a rock. The only thing holding back a complete collapse of the bond market right now is that the Fed Chairman is acting like the little dutch kid plugging the hole in the dike with his finger to hold back the onrush of water. The Fed is just forestalling the inevitable because this collapse is going to happen. It is just a matter of time.
So as an individual investor what should you be doing right now?
Getting out of the long term bond market as quickly as you can. In the next couple of months the bond market is going to be a wasteland. Don’t get left behind holding the bag. Escape while you can. There is no surviving the cataclysm that is about to happen, if you hold long term bonds.
George Stark is an experienced business analyst, consultant and writer who holds an MBA degree. For latest insights on stock trading and other investment tips. Visit http://www.stocktradingclearinghouse.com