Advice for Holders of Government Bonds, by Bill Bonner

Sell. From Bill Bonner at rogueeconomics.com:

YOUGHAL, IRELAND – U.S. Treasury bond prices got a lift on Tuesday, with the 10-year yield falling below 1.7%. (Remember, when yields go down, bond prices go up.)

In August of last year, the yield on the 10-year was only 0.51%. But since then, it has been heading up. Now, even after the recent dip, it’s still more than three times that.

And the quarter just ended was the worst for Treasuries in almost 40 years. Not since the 1980s have yields risen by so much, so fast.

That move – before investors took former Federal Reserve chairman Paul Volcker seriously – proved to be the last gasp of the last bear market in bonds, that had begun three decades earlier.

Not that we know anything you don’t know. But this latest move over the last quarter looks like the first gasp of the next one.

And investors will soon learn that their faith in current Federal Reserve chair Jerome Powell and Treasury Secretary Janet Yellen is a mistake.

A Bird in the Hand

U.S. Treasury bonds trade on the full faith and credit of the issuer – the United States of America.

We’ve been exploring the decline of the U.S. empire this week. If we’re wrong about that, we may be wrong about this, too.

Perhaps faith in the credit of the U.S. will increase. But to make a long story short, our guess is that Treasury bonds have a lot more bad quarters coming.

After all, a U.S. Treasury bond is a promise to pay the lender back with a stream of U.S. dollars. Currently, that stream is enhanced by a yield of the aforementioned 1.7%… more or less.

But it is reduced by the uncertainties of the future… and by consumer price inflation.

“A bird in the hand is worth two in the bush,” is the old expression. The ones in the bush might fly away before you get your hands on them.

And if you get hit by a runaway Amazon delivery van, you might not enjoy a single penny of the money you invested in U.S. Treasury bonds.

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2 responses to “Advice for Holders of Government Bonds, by Bill Bonner

  1. DWEEZIL THE WEASEL

    Remember the line from GREMLINS II – THE NEW BATCH: “…we’re advising all of our clients to put everything into canned goods and shotguns.”
    Get out of debt. Get out of the market. It will be just like 2008, when those treasonous rat bastards Bush, Cheney, and Paulson gave the Wall Street Banksters $850 Billion of our money. Only this time, the debt buck will go south, the trucks will stop running, and the sheeple will really start bleating. Bleib ubrig.

    Like

  2. The Old Freedom Fighter

    Good advice Weasel! I always enjoyed reading Robert Ringer’s books over the past 40+ years. He once described buying US Government bonds as an investment in toilet paper. I’d prefer using the real stuff.

    Like

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