The Definitive Bond Bubble Guidebook
“There’s no such thing as safety” - The Atlantic
If you’re like most Americans, a highly dangerous investment lies at the very core of your portfolio.
Thanks to the distraction of a soaring stock market, I believe most investors have a huge blind spot for the coming danger coming from the inevitable popping of the Treasury bond bubble.
And it could soon obliterate everything from your savings, your home’s value, your dividend payments – and more importantly – your quality of life.
You may not directly own Treasuries directly – so you might think you’re safe.
The problem is, Treasuries are so central to the financial world that most people will be taken off guard...
That’s why I’ve spent the past two years quietly warning people about this “worthless” investment – and why I’ve prepared this presentation.
Specifically, I believe that a single event will take place that will negatively impact the value of Treasuries, and wipe out many other related assets in the process.
Think of Treasuries as a giant domino that will crush almost everything as it continues to fall…
Because it’s already begun.
Bond prices have already fallen 5% since May.
The crisis we face is every bit as serious as the one that brought down the financial system in 2008 – and while I hope it will pass us by, my research tells me we can’t avoid it for much longer.
I have to warn you that you may hate what I have to say – and trust me, I’m not too thrilled either.
But this issue is too important to ignore. It’s too important to simply lock up in a safe and forget about.
The time to face this problem and to deal with it is very short.
This issue is larger than the subprime crisis, the dot-com bubble or the junk-bond crash of the late 1980s, much more dangerous, - because it affects every other investment and asset. Almost nothing is safe.
And while I know the situation is serious, there are some VERY basic steps you can take today – to ensure that what’s happening won’t impact your retirement or quality of life.
The Worst News Since 1977
It’s already begun.
If you’ve felt as I do – that this whole “recovery” is phony – based on a rickety system of money printing, corporate cronyism and baloney government stats…
I have to say it’s definitely not your imagination.
It doesn’t “feel” right or real, because it isn’t.
The huge recovery in stocks – as well as a solid housing turnaround – is based on a fiction. And like all financial fictions, it’s beginning to unravel.
There are few things I know for certain about the investment world.
But without the slightest doubt, I know that over the next few months and years, one thing will happen for sure:
Bond prices will collapse – and at the same time rates will soar.
How do I know for sure?
First, consider what happened during the last great bond
Unemployment skyrocketed from already elevated levels.
Housing prices stagnated for a decade...
Inflation spiked, sending crude oil from $12 a barrel in
the early 1970s to over $70 a barrel by 1981
Sugar prices got so high in the last 1970s that
newlyweds frequently received sacks of sugar as wedding
So what JUST happened?
Our creditors just sold a record amount of US Treasury debt – going back to 1977, we’ve never seen such a flight from Treasuries...
China, Japan lead record outflow from Treasuries” – Reuters, August 2013
It’s one more sign of a big change in the Treasury market...
And it’s threatening to destroy nearly every investment in existence when it fails.
Proof of Destruction
The facts I’m about to share with you are almost comical.
I’m talking about numbers so large that they lose all meaning – they might as well be made up…
Please understand that I don’t present these facts cheerfully. They’re important for you to grasp exactly what’s happening.
And while I know most people aren’t interested in these types of boring details, I believe they’re essential to getting through to the solution…
First off – everyone knows that the United States is in a huge amount of debt. But the number is hard to put into perspective.
The human mind has a hard time understanding the difference between one very large number and another.
A billion – a trillion – they’re both so huge that they might as well be the same.
It’s like trying to understand the distance between stars.
For some perspective – the difference between $1 billion and $1 trillion is the difference between a penny and a $100 bill – or the difference between making $10,000 a year and making $10 million a year.
The image below shows the true scale…
Right now, the official U.S. debt load is just under $17 trillion.
That’s over $40,000 for every American citizen.
Of course, not every American has a job, and even of the roughly 140 million employed Americans, only about half pay any Federal taxes.
So the real debt load per taxpayer is over $240,000…
Consider how that debt compares to Detroit’s recent bankruptcy.
Detroit, the poster-city of mismanagement, financial ruin and corruption ONLY had a debt load of $28,000 per taxpayer.
Federal debt is MUCH worse – and that’s in a best case scenario.
If you live in a household with two working adults, you can adjust that number upwards.
To make matters worse – the Federal Government is still running an annual deficit that will run about $750 billion in 2013…
The Congressional Budget Office projects that the government will add an another $6.3 trillion between 2013 and 2023.
So… that $240,000 that each taxpayer owes will jump to $325,000 in the next 10 years.
The numbers get worse from there. Unfunded liabilities (that is, future expenses) are in the hundreds of trillions.
The bill coming due for our children and grand children is laughably large – over $1 million per taxpayer…
Understand these numbers for what they are: complete nonsense. There’s no way we’ll ever pay back these debts. Not even close.
The ONLY way the government can afford to pay these debts is to issue more and more Treasury bonds.
And our creditors know it. Which is why they’ve begun selling.
I said earlier that I’m concerned about a single event that will crush nearly every financial asset. And I believe that event is already beginning...
China and Japan are selling Treasuries faster than EVER before.
That event is happening. Right now.
And it all begins with the biggest and single most important market in the world: The United States Treasury Bond Market.
Why are Treasuries So Important and Dangerous?
First off, you should know (if you don’t know already) that the Treasury market is the world’s largest and most influential financial market.
Every corporate, municipal and foreign currency bond, every mortgage and car loan, every bank account in the world – they all follow the leader of the Treasury market.
Your mortgage rate takes its lead from the corresponding Treasury rate. If the 30 year Treasury yields 5%, a new mortgage loan rate will be more than 5%. That’s a guarantee.
Every debt security in the world has a relationship with the Treasury market. No loan interest rate undercuts than the prevailing Treasury rate. It IS the lower bound.
Essentially, the Treasury bond market creates the very rules the financial world has to follow.
If you’re familiar with the butterfly effect metaphor, you know about the idea of a small action having huge effect – a butterfly flaps its wings and causes a hurricane thousands of miles away…
In this case, the metaphor is flipped.
The Treasury market is the hurricane. Everything else is a butterfly.
And it’s all built on a sham…
You’ve probably heard of people talk about the Treasury bubble, or the bond bubble. And for years, if you bet against Treasuries, you’ve lost a fortune.
But that’s about to change…
As I said, our debts are almost $17 trillion, (and growing).
Those debts exist in the form of Treasury obligations. They’re not just a note in a ledger: investors and institutions around the world OWN these liabilities as Treasury bonds, notes and bills.
For perspective, $17 trillion is larger than the entire Gross Domestic Product of the United States.
That means it’s BIGGER than the entirety of our country’s production for a whole year.
But these large numbers don’t automatically make Treasuries a bubble asset.
I say that Treasuries are in a bubble because the size of the Treasury market is nearing a breaking point.
The U.S. Treasury is getting close the point where it will soon have difficulty funding its own interest payments.
You can imagine that even a small interest payment on $17 trillion would amount to a significant number. And you’d be right.
Take a look at the annual interest payments the Treasury has made for the past 180+ fiscal years:
Notice that they’re growing – having doubled since 1988.
And they’re slated to grow even more in the coming years. Remember – I’m only talking about the INTEREST on our debt. That’s the bare minimum we have to pay.
And what happens when the federal government can’t afford to pay back the principle?
Simple: they just roll over the debt into new Treasury securities – creating more debt in the process. Who buys this new debt?
Well lately, it’s been snatched up by the Fed – which is why we’ve seen our money supply skyrocket – and prices alongside.
And today, just the interest payments alone on our debt amount to 1/5th of our annual federal tax receipts.
Imagine if 20% of your income went to funding just the interest on your debts – and that you went into more debt each year – and that your total debt was more than your annual take-home salary.
At some point, you wouldn’t be able to make your minimum payments…
And I think we’re approaching the point where the Treasury and the Fed will run into that same problem – and as they always do – they’ll print up the difference.
But it won’t work.
Here’s why it won’t work
We’ve doubled our debt in the past three years – so there’s a windfall amount of new debt interest payments that will come due over the next five, 10 and 20+ years…
All the while – we’re still taking on new debt every day.
When’s the breaking point?
It’s now. It’s happening. Rates are rising. Treasury prices are crashing.
What do our creditors in Asia seem to know that most American leaders don’t?
Why are they selling?
I believe it’s because in a matter of months, the Treasury will begin to monetize its debt.
That means they’ll have to have the Fed print money just to make interest payments. Every new dollar minted to pay down the debt will further unravel the dollar’s value – and Treasury holders will see the real value of their securities shrink substantially.
What will eventually happen is that it won’t just be the Chinese and Japanese governments selling our debt. It will be mutual funds, hedge funds, pension funds rushing for the exits.
Then, mainstream investors.
More and more people will see Treasuries not as secure savings vehicles, but as guaranteed money losers.
And everyone will rush to sell their Treasuries at any price. After that, yields on all Treasuries will necessarily have to rise – forcing prices lower…
It will have a severe effect on the credit market – and crush a variety of investments and assets that many people view as “safe” today.
And even worse, the people in charge of our financial system are completely unable to fix the situation – because they’re the same people who got us into this mess in the first place.
And with Keynes’s rules of financial governance guiding their actions, they’ll only make things worse…
The Only Solution
The situation is serious, but not hopeless.
And as bonds continue to crash, I know for a fact that you and I will be flooded with confusing, urgent and fear-based information about our investments.
Folks like Jim Cramer will go on tirades on television about their theories.
Politicians will react in the worse way: blaming investors rather than themselves.
And a variety of weird and irrational ways to protect yourself will come out of the financial media.
It will be almost impossible to focus on the facts. I hope that the information I’ve shared in this letter will help you keep your head – but I also remember what happened in 2008 and 2009.
Back at the height of the crisis, I had to beg people to buy stocks. I put $100,000 of my own money on the line and showed people what I was buying – in the hopes that people would IGNORE the panic on the airwaves...
So this time, I’ve put together all of my research on what to do NOW – before the crisis becomes obvious.
You see, I’ve found a select group of financial assets – outside the influence of the Treasury market.
I’m revealing the names of these assets to a group of paid subscribers of my newsletter High Yield Wealth on September 3rd.
And in fairness to them, I cannot give away the details of my research in this presentation to you.
I’m publishing everything in detailed research report called “The Bond Bubble Survival Guide.”
If you live in the United States, you can STILL buy these assets today. But once the bond bubble really unravels, I can’t make that guarantee.
But I will publish this information and make it available to you
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My Personal Belief about Investing
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