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Here in lies the dilema I have recently brought up. The US is bankrupt, and every year we need to finance more and more as a % of our GDP with NO end in sight.
To finance the "BAIL OUT of the BANKSTERS" we had to print some more....funny money. We have an ongoing war, more debt......unfunded liabilities MUCH more debt....our GOV doesn't know how to LIVE WITHIN THEIR MEANS>
Some of this gulf, the insatiable appetite to spend, will have to be made up in HIGHER TAXES.
Then we had the historic fear from finacial crisis, and in NEVER BEFORE SEEN numbers people got herded into Bonds and Bond Funds.....some $300B in 2009 compared to pitiful $30B or so in equity only funds.....quite the disparity.
SO we have a 25-27 yr old Bond BULL, we have RECORD (think EXTREME) amounts going into bond funds, record fear, andnow we have to fund RECORD DEBT......we have FED printing mney to buy the same bonds (monetizing). They say this QE will end in march of 2010.
I have shown rates long term 10 yr are turning up. If fear eases, it is SAID economy getting better....this kind of talk usually brings selling to bonds...yields rise.
We also know little guy almost always is buying when should sell, sell when should be buying...almost always wrong......and now has run into bonds in record numbers just as need for debt increasing and FED intervention nearing an end game.....
I fear a BOND CRASH.....and bond market measurably LARGER than stock market......and I hope I'm wrong.
OVER LIQUIFIED markets seeing FED and GOV backstop had an incredable 2009.....wiil that continue?
D
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