Here's a post for my hyperinflationist readers. Nothing new here, just Peter Schiff (Euro Pacific Capital) and Marc Faber (Gloom Boom Doom Report) telling CNBC viewers that Treasury bonds are in a bubble. Marc Faber's view is that Treasury yields bottomed out (prices peaked) in December 2008 (2.08% on the 10-year and 2.53% on the 30-year yield). He said "there isn't much upside for Treasuries unless it's for the short term and even the short term is uncertain". He believes the weak economy and policies will expand the Government debt even further and said "one day the interest payments on the Government debt will become unbearable". Faber likes gold, farmland (+6% in the Midwest 8/26) and agricultural commodities.
Peter Schiff is also concerned about interest payments.
"What I'm afraid of is that when people realize that we can't pay this money back, we're not going to be able to roll over all this short term debt, and so it's not just paying the interest, we're going to have to start retiring the principal, and that is just impossible, so there's going to be massive inflation".
Schiff thinks the bond market is the mother of all bubbles: "when it bursts the losses will dwarf the combined losses of the stock market bubble and real estate bubble".
"This decade is going to be the worst decade for bonds in U.S. history. Bond holders are going to get wiped out, because either the Government's going to default or they're going to inflate, but either way the people holding the bonds are left holding the bag."
Schiff warned the public about the upcoming housing and subprime mortgage crash and "evaporation of wealth" back in 2006 on CNBC and Bloomberg (see videos here and here).
If the Fed can't control deflation and the U.S. turns into Japan, prices on all assets will move lower, making Treasuries a safe haven. Gary Shilling (A. Gary Shilling & Co.) thinks the 30-year bond yield will hit 3% and David Rosenberg (economist at Gluskin Sheff) made a bet with Marc Faber that Treasury yields would break the 2008 low. As a chart watcher, I say watch for an ascending channel breakdown in $TLT or short Treasuries when 4% gets taken out on the 10y-note (2008-2009 highs). You might have wait a while for that trade. Here's a snapshot of TLT.
$TLT (iShares Barclays 20+ Year Treasury Bond Fund) via StockCharts.com