Wednesday, August 8, 2012

Stocks and Bonds

The financial crisis has driven investors into the bond market and away from the stock market.

The equity-bond divergence is currently at its widest this century. Bernanke, at this time, is maintaining a relatively slow money growth policy, which may lead to a further collapse of the stock market and economy. This may initially lead even more money into the bond market. However, if there is another collapse of the stock market and economy, Bernanke is likely to respond with very aggressive money printing, at which point bonds could collapse and the stock market could soar.

It is much too late to be a bond buyer. If Bernanke starts printing aggressively any time soon, price inflation will push long-term interest rates higher. Stay away from the bond market, it is a trap.


  1. David Stockman and I think Peter Schiff talk of a bond market bubble and eventual collapse ( Is a bond market collapse a real thing? What would it look like? Do yields shoot back up to the top of your chart? Or OFF your chart? Has such a thing ever happened? Is that the figurative zombie apocalypse we're waiting for?

  2. One should look behind the stock prices... the volume. It's 1/3rd what it was (down 2/3rds) at the housing bubble peak. This is not just due to lower trade size, but I have metrics regarding the number of traders, which is down to 1/3 also. That is a "DANGER WILL ROBINSON" situation. Very few entities are setting price, which is an implied risk not seen in price. Price is not justified by economics, so tread in the markets with extreme caution.