Jim Rogers: Bond Bubble Burst

Basing his assertion upon unsustainable borrowing, Jim Rogers said that the next bubble to burst will be the U.S. government bond market. Rogers added in a recent interview that equities are sure to experience correction as well, after six months of going straight up.

"The next bubble that I see developing is in the United States government bond market. It is inconceivable to me that anybody would lend money to the U.S. government for 30 years in U.S. dollars at 3 to 6 percent interest rate," he said.

"So, somewhere along the line, this bubble is going to pop. If any of you own bonds, I'd be terribly worried, I would think about getting out of the bond."

As far as equities, while Rogers expects a correction, he isn't selling equities short, and the market could possibly continue going up. His idea is it's a probability that the market could go through a period of correction.

Rogers continues to be bullish on commodities, and he favors oil, precious metals and agriculture at this time.

Jim Rogers | U.S. Treasury Bond Bubble

Jim Rogers agrees with Peter Schiff that buying or investing in long term or 30 year government Treasury bonds will be a disaster, and investors should watch them in order to short them when the government stops interceding and artificially propping them up by buying them.

Investement expert Jim Rogers gave a scathing rebuke to clueless Obama Treasury Secretary Tim Geithner and his ideas in relationship to overhauling the bailout of the financial system in the U.S. Rogers in an interview on CNBC said Geithner, who was in charge of the NY Federal Reserve, was wrong for 15 years in a row, and continues to be wrong now. He adds that the Obama plan via Geithner will cause U.S. debt to surge even higher, and is creating an even worse scenario by the same people who didn't identify the crisis coming that we're in. Rogers concludes that Geithner has no idea what he's doing.

Consequently, similar to the insight concerning U.S. debt as Peter Schiff and the
Treasury bond market bubble bursting, Rogers said he has been shorting bonds, although he was ambushed by the Feds when they declared they were going to be buying Treasury bonds, causing Rogers to have to pay out when the Treasury bonds ended up going artificially higher. Just because the government is buying up bonds doesn't mean any of us should buy government bonds, and we shouldn't. Investing in U.S. Treasury bonds for the long term at this time is one of the poorest investment idea out there now.

Rogers added that he is still watching the long term Treasury bond market, and plans on shorting it again, as the amount of debt the U.S. is issuing and the huge amount of money being printed makes inflation almost a certainty. It will also push down the value of the U.S. dollar, making government bonds a risky financial instrument going forward. Another factor making the bond bubble being burst a reality is the low interest rate policy of central banks, which will deflate of cause the bubble to burst.

When the Federal Reserve announced they were going to buy up long term U.S. Treasury bonds, speculators zoomed into the market to buy them up, causing them to hold in value, when in fact they should have been dropping in value. That has added to the bubble being ready to burst, as who's going to be stupid enough to buy Treasury bonds when the government is holding them. They're going to overall get stuck with them, and then what will they do?

Jim Rogers has said in the past he's one of the worst market timers, and doesn't attempt to time the market, and in relationship to bonds said he doesn't know when he'll short long term Treasury bonds again, as it could be sometime this quarter or maybe not till next year.

Government bond prices and bond yields are worthless and meaningless at this time, especially with the 30 year Treasury bond. The only ones buying those bonds are the clueless or the speculators. Long term bonds are dead in the water, and we need to know that before thinking of putting our money down to buy government bonds.

Some people unbelievably think buying bonds is a safe bet at this time, and they'll learn the hard way that they aren't if they go that route. Forced liquidation has been one of the artificial props keeping bonds floating, as well as the U.S. dollar for a short time. That seems to be winding down now, and gold is looking to be the best safety hedge and protection against inflation like it usually is. Forced liquidation has kept gold from performing in its usual manner, but is now starting to act and move like it usually does in difficult economic times.

On a little bit of a different note for Jim Rogers, he started up the Macquarie and Rogers China Agriculture Index fund recently in order to take advantage of the enormous upside potential of China. The China fund measures the consumption of agricultural products by the Chinese, and floats or moves in conjunction with that. The growing middle class in China guarantees that once economic times start to recover, they'll be ready to resume their consumption habits which should make the Macquarie and Rogers China Agriculture Index a good place to put your money for those looking at the long term.

Commenting on Central- and Eastern-Europe, Rogers also said he's not going to put a dime into those areas, as the economic conditions are bad, and they're probably going to get worse before getting better. Currency rates in Eastern Europe especially have fallen since the beginning of 2009.

The key reason Jim Rogers asserts for buying commodities is the inevitable increase in inflation resulting from the misguided government bailout plans. Commodities will resume their bull run and become hot again and extend out longer than he expected because of the temporary lull in buying by consumers and governments.

Back to investing, or rather, not investing in government bonds - specifically the 30 year Treasury bond - Jim Rogers, as I said, is watching the bond market for opportunities to short it. He's also looking at equities in the U.S. the same way, as he's shorting a number of bellwhether companies like IBM, JP Morgan Chase and General Electric, among others. Anything connected to the U.S. dollar, which we should all be moving out of, is looked upon as week, and not something to put our investment money into. General Electric has plunged in value by 65 percent from last year at the same time. Most of the reasoning behind this is the horrid government economic bailout plan which will prolong and deepen the economic conditions.

U.S. Dollar Collapse 2009 | The Perfect Storm?

The idea of the U.S. dollar collapsing in the way it's being thought of today, would have been unheard of in times past. Sure, we've had times of steep inflation where it was dollar was devalued, but nothing like the perfect storm approaching us now.

We have everything from the many variables connected to the economy, foreign governments eyeing the dollar suspiciously for the first time, low interest rates, U.S. Treasury bonds about to burst, China slowly moving out of U.S. dollars (selling bonds), out of control government bailouts, more government bailouts, increased socialization of American economy, and finally, the misguided idea of the dollar printing presses running day and night to provide the money to deal with all of this.

This doesn't include the bloated budgets needed to handle the ongoing policies of FDR - which President Barack Obama foolishly has asserted he's going to continue and expand - like social security and medicare, which will skyrocket even more on a yearly basis as baby boomers swarm into their retirement years.

We have to understand the U.S. dollar can collapse in a number of ways, and it's not always obvious that it has, especially with its ultimate enemy: inflation. But there's no way inflation isn't going to come, as the promises and misguided policies of politicians hoping to hold on to their government positions, ensures the printing presses will continue to run, and also ensures the dollar will buy much less. This is the type of collapse that hides what's really happening and the cause, as most people don't understand the direct correlation between printing hoards of money and the consequential devaluing of the dollar ... or any currency for that matter.

The reason America's been able to get away with pushing the limits with this has primarily been the acquisition of U.S. Treasury bonds by China. China is now abandoning that strategy and moving its money elsewhere. That means with China no longer financing the U.S. economy, America will have to look for financing elsewhere. Where would that be, as no other country is going to buy up an asset like the U.S. dollar when it could be on the verge of collapse.

There is no other recourse for the Federal Reserve (in their minds) but to keep the printing presses running. It doesn't occur to government leaders that they have no power in these affairs, and the real answer should be to downsize government, along with its unrealistic programs it offers citizens to buy their votes and generate dependence upon them.

One unfortunate side effect of this is people could remain in the dark if they don't understand that printing money will weaken the dollar and push the prices of goods and services up. If they don't understand this, we'll be doomed to repeat the fiasco again and again, as we continue to follow the same strategies and make the same mistakes.

China Using Yuan instead of Dollars in Transactions

China has already said it will allow its yuan to be used internally for settlement in some of its riches provinces:

"China will allow the yuan to be used for settlement between Guangdong Province and the Yangtze River Delta, China's two economic powerhouses, and the special administrative regions of Hong Kong and Macau, according to the central bank.

"Meanwhile, exporters in the Guangxi Zhuang Autonomous Region and Yunnan Province in southwestern China will be allowed to use the yuan to settle trade payments with members of the Association of Southeast Asian Nations.

"Those moves are expected to facilitate overseas trade, as Chinese exporters might face losses if they continue to be paid in US dollars..."

Putting the inevitable inflation scenario aside (which will happen, it's only a matter of degree) we could have a more robust slaughter of the dollar, based on the other numerous factors we've mentioned above.

If China decided to take drasic measures and sell a lot of their Treasurys, that would put tremendous downward pressure on the value of the dollar, while there's also the real possibility of OPEC, and others, deciding to get out of US securities as well, again, making America's only choice to print more money to pay off its debts and faulty social programs.

Another important part of the economic puzzle is that China has obviously been the primary provider of inexpensive goods to American consumers. So even though the U.S. has pressured China to increase the value of the yuan, the result would be higher prices of goods for Americans, which would end up causing even more pain. A perfect storm ending with the collapse of the U.S dollar?



Many financial and economic experts have told government officials they needed to stay out of the economy and just let things run their course. Past experience has shown that government interference makes things worse, not better, for the economy.

So will the U.S dollar collapse in 2009? It's a very real possibility. We have a perfect storm of variables that could together bring the dollar down to emerging markets status.

Foreign Investment in Long-term U.S. Treasury Bonds Falls in November - It's Only the Beginning

We've been talking a lot lately of the crisis with the U.S. dollar and how it's probably already starting to happen, even though there's been some temporary strength in the greenback.

A government report confirms it was the experience in November, as demand for long-term Treasury bonds from investors outside the U.S. fell, along with corporate and agency debt.

While many "experts" are saying it's the decline of risk aversion, I think that's totally wrong. That falsely assumed there was risk aversion involved in the first place for their to be a decline. There wasn't, as the Treasury report said.

What serious international investor, whether it's an individual, fund or country, doesn't know what's going to happen to the U.S. dollar going ahead? They know what all this misguided stimulus debt is going to do to the value of the dollar.

Here it is for you in simple terms:


The government wants to spend money it doesn't have

They can't get foreigners to pay for that money

The Federal reserve announces it'll buy up U.S. Treasury bonds

Speculators swarm like sharks around a bleeding body

Speculators buy Treasurys knowing Fed will buy them back

Fed is holding Treasurys with no one to sell them to

Fed prints more money to pay for further debt

The U.S. dollar plummets in value and inflation rears its ugly head

This is what's ahead for the U.S. dollar and Americans. Why do you think foreign investors are no longer buying the U.S. dollar? They know what's going to happen to it, and haven't been viewing it as a place of safety as some have wrongly asserted.

Speculators have been buying up the dollar and keeping it where it's been because they then resell it to the government, which said it was buying it. Some analysts assumed it was people buying to hold the bonds, when in reality they were only buying to resell to make a quick profit.

That gave the illusion of a market for the dollar, when in fact it was something entirely different.

If you aren't sure about that, just ask yourself the question of why foreigners are cutting their investment in Treasurys. This is just the beginning of fleeing from the dollar, it's going to get much worse.

U.S. dollars are not the place to be at this time, investors need to be moving out of them.

Peter Schiff: U.S. Bond Market Bubble about to Burst

Peter Schiff puts forth an excellent argument on not only why the U.S. Treasury bond market is in a bubble, but why that U.S Treasury bond bubble is about to burst. When will the bond bubble burst? We of course can't tell, but the conditions are set for it to happen in the not too distant future.

The underlying cause is the current buyers of US Treasury bonds are primarily speculators. What has brought that about?

According to a recent Federal Reserve announcement, the Fed says it's committed to buying long term Treasury Bonds. What that tells you is other people or governments are getting out of the U.S. dollar and looking at other places to put their money. If that wasn't the case, the Fed wouldn't have made that announcement, as it would have been meaningless if money was flowing in to buy up U.S. debt.

In response to that announcement, speculators are now the ones buying the bonds for the purpose of selling them to the announced spending spree of the Fed. No one is in the market for holding US bonds until maturity now; at least no one that understands even a little bit of what's really going on.

To buy those bonds the Fed will have to print more money to make the acquisitions. Consequently, the more the Fed buys, the less the bonds will be worth. The reason is the more the Federal Reserve prints money, the more the dollar drops and collapses in value.

U.S. Treasury bonds are now a ponzi scheme, because the thing underpinning the success of the US bonds is the dependence on people to continue buying them. If people, funds and countries stop buying bonds, as they are now starting to do, eventually the last buyer comes in and the seller is left with no options but to hold them.

So when people stop loaning money through buying these bonds, the bubble will burst. Schiff believes the bubble is already here, and it's not that far away until the pain comes.

Schiff adds that the Obama stimulus package is a disaster, and will only make things much worse, as the same principle involving the upcoming bond bubble bursting will come about from the continuing debasing of the U.S. dollar by the endless printing of money.

So the illusion that the U.S. dollar is a haven for investors is already starting to burst and collapse, and the bond market bubble about to burst. The collapse of U.S. Treasury bonds isn't going to happen overnight, it'll be gradual and subtle, and we'll have to watch things closely so we're not lulled into thinking they're safe and will hold their value. They definitely aren't going to hold their value in the ongoing U.S Treasury fund bubble.

While it's quite possible the air could come out of bonds very quickly, in all likelihood, it'll be a slow, deflating process rather than a quick burst of the US bond market.

The U.S. dollar is no place to be at this time, and the house and senate are about to pass over $800 billion more in bailouts which will continue to deflate the U.S. dollar and U.S. Treasury bonds.

The bond bubble will burst and will collapse along with the U.S. dollar. If I was invested in the dollar, I would get out of it as quickly as I could, as once things start to collapse and slide, it'll be like a slow avalanche continually building up momentum until it overtakes anyone on the mountain. Investing in the U.S. Treasury bond market and U.S. dollar are that mountain, and if you continue to ride it you'll find yourself and your money suddenly covered with the snow of a weak dollar and stuck with a bond you thought would be of value in the years ahead.

There's no doubt there's an ongoing bubble in the U.S. Treasury funds market, and nothing will change the disaster about to happen to those holding the bonds in the end. It looks like for the most part it'll be the U.S. government who has foolishly announced it'll buy up the bonds. That has released the plethora of speculators buying Treasuries so they can then resale them to the government at a profit. Don't get caught up in that game.

One final and big piece of the Treasury bond collapse is it's also similar to the forced liquidation which drove down the prices of some commodities like gold, which obviously is the investment of choice in times like these.

Because bonds are one of the easiest to unload investments, being so liquid, we'll start to see, and have already seen, some countries slowing down their investment in the bond, and probably will start to unload them to get access to more cash. When that happens, it's hard to tell how devasted the collapsing bond market will become.

As Peter Schiff says, the US Treasury bond market is in a bubble which is about to burst, don't get caught holding bonds or U.S. dollars when it happens. We don't know when the U.S. bond market will collapse, but we know the conditions are ripe for it to happen. It's not a question of whether the Treasury bonds will collapse, it's only a question of when and how quickly they'll collapse.