From The Reformed Broker:
I’m going to say this here and now for posterity and I hope you bookmark it:
There’s going to be such a brutal bond investor slaughter at some point over the next decade that the streets of Boston’s mutual fund district will run red with blood, the skies will be shot through with the lightning and thunder of unexpected capital losses and those who manage to survive will envy the dead.
Now a slaughter in bonds will not look like an equity market crash, the volatility characteristics are different and bonds eventually mature. But in some ways, it will feel much worse than a stock crash because the money parked in bonds is thought of as low or no risk.
The fixed income guys know what’s going to happen, too. Why do you think the Bond Kings at PIMCO and DoubleLine are pushing into equity funds? They’re getting three-year track records under their belts for when the big switch comes.
And it will come.
You know how I know this? Because you lunatics are plowing money into fixed income at all-time low interest rates during the parabolic final phase of a 30-year bond market rally. You are going limit-up long into one of the most obvious blow-off tops in the history of investing. And you’re doing this with almost guaranteed inflation ahead of us and only the prospects of negative real rates of return on your T-bills.
And you’re doing this because you are mistakenly worried about…