David Kirkpatrick

June 8, 2010

Looking for the next financial bubble

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 5:50 pm

As far as investment instruments go, bonds aren’t very sexy, but the bond market is shaping up to be the next major financial bubble. Food for thought for anyone currently rethinking investment strategies.

From the link;

Don’t let the lack of fanfare fool you. A projected $380 billion will pour into bond funds this year, more than went into domestic stock funds in the past decade. That’s on top of a record $376 billion last year.

“The bond market is a bubble,” says Robert Froehlich, senior managing director of the Hartford Financial Services Group. “And it’s getting ready to burst.” One major reason: Despite the recent rally in treasury bond prices and slide in yields — due to fears over the European debt crisis — the long-term direction for interest rates is headed higher.

Like all financial manias, this one is being fueled by a combination of fear and greed.

James Stack, a market historian and president of InvesTech Research, notes that many baby boomers who have stampeded into bond funds did so in reaction to their stock losses since the financial crisis began in 2008.