Experts Are Warning That The 76 Trillion Dollar Global Bond Bubble Is About To Explode 

Warren Buffett believes “that bonds are very overvalued“, and a recent survey of fund managers found that 80 percent of them are convinced that bonds have become “badly overvalued“.

The most famous bond expert on the planet, Bill Gross, recently confessed that he has a sense that the 35 year bull market in bonds is “ending” and he admitted that he is feeling “great unrest”. Nobel Prize–winning economist Robert Shiller has added a new chapter to his bestselling book in which he argues that bond prices are “irrationally high”.

The global bond bubble has ballooned to more than 76 trillion dollars, and interest rates have never been lower in modern history. In fact, 25 percent of all government bonds in Europe actually have a negative rate of return at this point. There is literally nowhere for the bond market to go except for the other direction, and when this bull market turns into a bear it will create chaos and financial devastation all over the planet.

 

In a recent piece entitled “A Sense Of Ending“, bond guru Bill Gross admitted that the 35 year bull market in bonds that has made him and those that have invested with him so wealthy is now coming to an end…

 

 

And the way that he ended his piece sounds rather ominous…

Bill Gross is someone that knows what he is talking about.  I would consider his words very carefully.

Another renowned financial expert, Yale professor Robert Shiller, warned us about the stock bubble in 2000 and about the real estate bubble in 2005.  Now, he is warning about the danger posed by this bond bubble…

For years, ultra-low interest rates have enabled governments around the world to go on a debt binge unlike anything the world has ever seen.  Showing very little restraint since the last financial crisis, they have piled up debts that are exceedingly dangerous.  If interest rates were to return to historical norms, it would instantly create the greatest government debt crisis in history.

A recent letter from IceCap Asset Management summarized where we basically stand today…

Negative interest rates are by nature irrational.

Why in the world would you pay someone to borrow money from you?

It doesn’t make any sense at all, and this irrational state of affairs will not last for too much longer.

At some point, investors are going to come to the realization that the 35 year bull market for bonds is finished, and then there will be a massive rush for the exits.  This rush for the exits will be unlike anything the bond market has ever seen before.  Robert Wenzel of the Economic Policy Journal says that this coming rush for the exits will set off a “death spiral”…

As this death spiral accelerates, we are going to see global interest rates rise dramatically.  And considering the fact that more than 400 trillion dollars in derivatives are directly tied to interest rates, that is a very scary thing.

And in case you are wondering, the stock market will be deeply affected by all of this as well.  I believe that we are going to witness a stock market crash even greater than what we experienced in 2008, and other experts are projecting similar things.  For example, just consider what Marc Faber recently told CNBC…

Where we are right now is at the end of the party.  There are some that want to keep on dancing to the music for as long as possible, but most can see that things are winding down and people are starting to head for the exits.

The irrational global financial bubble that investors have been enjoying for the past few years has stretched on far longer than it should have.  But that is the way irrational bubbles work – they just keep going even when everyone can see that they have become absolutely absurd.  However, eventually something always comes along and bursts them, and once that happens markets can crash very, very rapidly.

 

By Michael T. Snyder, theeconomiccollapseblog.com

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