Bond Market Meltdown Next?????

With everyone focused on the bailout of the financial sector's foray into subprime debt and the ensuing fallout as that house of cards tumbles, there was talk out there in the media today about the market being at the bottom.

For some reason, it would appear they think there's light at the end of that dark tunnel.

Hmmmmmm . . . maybe it is a freakin' express train from hell heading straight for us.

Investors have spent the past few weeks bemoaning the devastation to their portfolios caused by the stock market downturn, which if it does not produce recovery by year-end will have made 2008 the worst stock market year since 1937. Their misery would be compounded if they knew that next year, while it may avoid more than moderate stock market mayhem, is likely to produce the worst bond market carnage in US history.

If the bond markets do tank, what does that mean to Mr. and Mrs. Average US Citizen? More money out the door . . .

However, domestic holders are a more serious problem. To the extent that pension funds have losses on their holdings of bonds, they will need to raise contributions; to the extent that insurance companies have such losses they will need to raise premiums.

Aren't these the same insurance companies already lined up at the trough taking our tax dollars? Does it surpise anyone that they'll be going direct to the source next year?







[edit on 11-11-2008 by GoalPoster]

GoalPoster:

Good post.

I certainly don't rule out a bond market rout in many countries over the next 12 to 36 months In fact, I am quietly nodding my head in approval.

The question (as always) is how to turn adversity into advantage.

THAT is the key.

At first blush what we need to find is a leveraged limited risk vehicle (ETF type) that will profit from bond yields rising in the 10 year to 30 year sector.