Tiny Bubbles (Musical Tribute)

May 12, 2008
Soros: Financial Crisis Stems from 'Super-Bubble'

Soros says there's a "super-bubble" in the economy that's bigger than just the recent housing crises, and he blames exotic financial instruments for helping cause it.

January 30, 2009
The new financial bubble is here

That's right: If you've been convinced that we'd soon see another bubble and that we hadn't learned much from our previous follies, and you've been waiting just to see which asset class would inflate and then go pop, wait no longer. The next asset bubble is here, and it's called the U.S. Treasury market.

Hurray!

The best things that you can say about this bubble are that because the Treasury market is so huge, it won't inflate to the extreme proportions of the past two bubbles, and that there are already signs that the bubble has reached its maximum degree of inflation.

Hurray!

But even with those optimistic caveats, the Treasury bubble is on a course to inflict plenty of pain on everyone from homeowners with mortgages indexed to 10-year Treasury notes to retirees who fled to government bond funds for safety.

Haven't the homeowners and retirees suffered enough already? I'm a homeowner, a retiree, and I've been nearly fully invested in the Treasury market for years. I'm in inflation protected Treasuries though. Maybe that's not quite the same thing.

We should be pretty darned good at spotting bubbles by now. We've seen a dotcom bubble, a housing bubble, and at least one commodity bubble so far this century. That's just the first eight years. 92 to go!

Assuming we are getting good at spotting bubbles, perhaps we can see which of the following two bond funds went parabolic and is either preparing to crash or is actually already in the process of crashing.

20+ Year Treasury Bond Fund (TLT) vs. Treasury Inflation Protected Securities Bond Fund (TIP)