Title: Is The Bond Market In A Bubble? | Seeking Alpha
Headings: Is The Bond Market In A Bubble?
Is The Bond Market In A Bubble?
Summary
Bond Bubble? What Bond Bubble?
The Forces of Deflation are Real
Is There Any Value in Bonds at These Levels?
Why I Believe Everyone Should Own Some Bonds
EB Investor

Content: It is also important to note that the velocity in the economy remains at the lowest level in over 55+ years, at 1.5% on M2. With such low velocity, inflation is not a concern. Investors should be concerned about the deep deflationary spiral that is engulfing the developed world from Japan to Western Europe. Rates have gone lower in the 30-year and the 10-year, and will likely continue lower, as the yield curve continues to flatten as the globe de-levers. From my perspective, the risk is enormous during this period. With many investors favoring all equity portfolios in the never ending chase for yield, I believe these investors are taking on more and more risk, forgetting the shock their portfolios received from the financial crisis. The Fed's QE program has made it seem too easy to recoup losses after a black swan event. In reality a 50% draw down in asset prices requires a subsequent 100% increase just to get back to even. However, a portfolio that includes long-term US Treasury bonds exhibits less volatility when implemented as part of a balanced diversified portfolio model. We can see in the chart above that STRIPS remain negatively correlated to the equity market.