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The Real Bubble Isn't Stocks… and It Will Make 2008 Look Like a Picnic
The 2008 crisis was just a warm-up.
The 2008 crisis was a banking and equities crisis. In the simplest terms, investment banks, leveraged to the hilt with garbage mortgage derivatives, became insolvent and began to collapse.
This collapse triggered a selling panic throughout the financial system as every financial entity questioned the quality of the assets backstopping its derivatives trades. The derivative market was over $700 trillion at the time. So just about every major global bank had broad exposure to this market.
The Federal Reserve and other Central Banks dealt with this issue by cutting interest rates to zero, opening emergency lending windows to needy banks, and engaging in Quantitative Easing.
The goal was of these strategies was to instill confidence in the banking system once again. However, by trying to prop up the big banks, the Fed has created an even bigger bubble than that which existed in 2007.
I’m talking about the BOND bubble.
With interest rates at zero, banks, financial institutions, and investors began to chase yields. This meant hundreds of billions of dollars worth of capital flowing into bonds of all different levels of risk.
When money poured into bonds, the bonds rallied, pushing their yields lower. This in turn meant more capital flowing into even riskier bonds as investors, still seeking yield, had to turn to riskier investments to obtain a significant return.
The end result? The bond bubble is so massive that it’s even hard to wrap one’s head around. Consider that:
1) Bond yields for many European countries are at multi-CENTURY lows.
2) US Treasury yields have only been lower TWICE going back to 1790.
3) Japan’s Government bonds now have negative yields.
We all know that most sovereign nations are bankrupt. But the “flight to yield” is so powerful in the system today that yields are negative in real terms. This is absolutely extraordinary.
When this bubble bursts, the REAL crisis, the crisis to which 2008 was just a warm-up, will begin. The global bond market is $100 TRILLION in size. That’s nearly TWO TIMES larger than the global stock market. And bear in mind that the only reason stocks are so high is because investors are piling into them to seek out returns.
So when this bubble bursts, it’s going to make the 2008 crisis look like a picnic.
If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.
You can pick up a FREE copy at:
http://www.phoenixcapitalmarketing.com/roundtwo.html
Best Regards
Graham Summers
Phoenix Capital Research
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There's a bubble in bullshit, I'll tell ya that compadres!
i'm not a prepper but i've got some food stored, i never planned on using it when things crash, i'll use up my cash for food, if there is any, and use my stored food for when there isn't any and a loaf of bread 50.00 if you get there first, or it's a life, or death decision to go the grocery store.
i do have faith in some americans i'll be able to buy what i need for cash on the black markets.
if rates go higher, then bonds will draw investment. so what if they dont is the question i suppose. if rates do go higher the government will find itself in the S&L squeeze, a huge liability to pay the interest on those bonds, and no revenue coming in to pay that interest. hmmm
Only yield investment right now is junk corporates. And they're set to sell off and have been. Step carefully.
This manipulation has to end. But you're right, how can you pay higher interest when nothing is coming in and social programs keep increasing?
RenegadeEconomist
RenegadeEconomist
RenegadeEconomist
RenegadeEconomist
RenegadeEconomist
RenegadeEconomistOk let's say the "investors" panic out of bonds (they do not believe the money will be paid back after some first haircuts) Rates will go to the moon. Ok. Countries will default. ok. But where do "panicky investors" put their money? Will this lead to Hyperinflation?
"Will this lead to Hyperinflation?"
No.
they buy bonds for the interest, but seriously there are a lot of gstrategies for bond buyers is a rising rate market, cutting coupons and stuff. and while some countries will lean toward default (Argentina) the US will get more hot money than they know what to do with, which creates problems. and the more they try to cap new issues the more premium goes into those issues those bonds that go to market. the political impulse will be to spend spend spend.
Everyone knows there's a bond bubble.
There's also, by extension, a dollar bubble.
Duh - ALL sovereign bonds now have negative yields in real terms.
Bonds per se are not the powder keg. Rather, it is the massively levered up derivatives that most people threw away their money at when they paid into "bonds" seeking "safe" investments in their 401(k).
Nope, don't have no stinken bonds.
Good, now I can go back to seducing Sofia Vergara, with all the other good stuff I learned on how to finally do it here over the last 6 months.
And my shorts in TZA and SKF will finally pay off.
The Bond King, Bill Gross is no slouch. If anybody knows what is going on in the Bond Market, he will...and you can see what he just did.
Actions speak louder than words...
The weather report for the next two decades: The mother of all storms.
Prep up bitchez...
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"Nuff Said"
Thanks for that, messy. A little clarity makes the medicine go down. Where else can it go from zirp?
Yeah right - Graham has been spouting this same headline for 6 straight years. Even a broken clock is right twice a day; better than Phoenix Cap.
Hungrydweller,
You can't time a socio-economic collapse of this magnitude with any certainty. I predicted 2013 in 1996. I was wrong. Cut the guy some slack.
http://curiousrat.com/assets/img/blog/buy-my-book.gif
B b b b but George Clooney got married, thats the real issue.
You'll never have him now!
I see a perfect storm brewing - Worldwide ebola epidemic, WWIII over ISIS and Ukraine, and overall economic collapse. Very soon all the preppers who have been rediculed over the years will suddenly become everyone's best friend! How much canned food and ammo do you have stashed away?
Not enough. Started prepping 3 months ago. Each time I buy groceries, I get extra canned goods and water.
Also, I heard this: Stored gasoline goes "off" after a period of time (some say 3 months, others 1 year).
http://www.amazon.com/dp/B0000AXY97/ref=wl_it_dp_o_pd_nS_ttl?_encoding=U...
angryBuddhist, there's no such thing as an angry Buddhist. ;-) equanimity is the word of the day.
Your post appeard just as I was typing mine below. You're right, a perfect storm is brewing.
Pranayamas,
All the angry buddhists were shot by armed quakers.
Bonds... James Bonds.
Chicken Dinner Winner for the day.