Agreeing With Siegel for the Record: Bond Market a Bubble

Coming inflation will be huge.

That which is done is what will be done,
And there is nothing new under the sun.
—Ecclesiastes

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It's like the Y2k "new era in technology," but this time in the bond market...




Crescenzi apparently is intoxicated by a strong portfolio, failing to understand the dynamic making it so. Surely, though, there can be many a squeeze on paper asset holders (bonds), attempting to shake out weak hands, so long as liquidity is amply provided by the backstop of last resort (the Fed and Treasury). Indeed, the drive for performance at current, historically low rates might all the more motivate such a disruptive squeeze any day now. What might come of this should too much leverage be correlated in the wrong direction, then? Another panic siezing the financial system. This time higher up in the capital structure. Equity will be just crushed.

Then, with once thought "safe" bonds discredited, where might the next Bernanke helicopter drop land? In things, not paper. Massive Inflation. A huge negative feedback loop. Siegel's inflation outlook grossly underestimates the risk here.

—Tom Chechatka