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Posted on 22 April 2011 | 8,309 views

2011 Treasury Bond Market Crash Any Day Now

We’re on a collision course with the “Worst Bond Market Collapse” in decades and the warning signs are as clear as day. Since the “Bond Market” is ready to crash at any minute, Bloomberg Television has an excellent bond market crash video with Laurence Kotlikoff, a professor of economics at Boston University, on how to prepare.

Strategists are now pondering the magnitude of this bond market move in 2011 which should cause the average investor to think — Smart Money and Big Money is after something and what do they know that I don’t — investors still have time to sidestep the forthcoming damage and even profit from it if you know what to look for.

Investors are looking at and now preparing for a bond market collapse which will probably start in the third quarter of 2011. Investors shouldn’t wait until then to adopt defensive investments for their portfolio. You should start positioning yourself now as both Gold and Silver are on the move — silver especially and 15% to 20% of your portfolio should be invested in gold and silver, the traditional inflation hedges. There is no safe place to hide, but owning gold and other precious metals such as silver could go a long way toward preserving your wealth.

There are three catalysts for a “Total Bond Market Collapse” which you need to know. Monetary Policy, Inflation and the Federal Deficit should cause you concern over your savings and retirement accounts because a “Bond Market Crash” will decimate your ability to retire for another decade.

• Monetary Policy — maker Chairman Ben S. Bernanke has kept interest rates virtually at zero (0.00%) for 30 months, with inflation now showing signs of returning. Since November, Bernanke’s been buying a full two-thirds of the Treasury’s debt issuance. He’s not going to raise interest rates anytime soon, which means inflation will accelerate, mostly through commodity prices and when he stops buying Treasuries, where will that leave the investors?

• Inflation — had been running at near zero because of the “Great Recession“, hiding the real “Inflationary Depression” but in the last six months the producer price index (PPI) has risen at an annual rate of 10%. That will feed into the consumer price index (CPI) over the next few months. At some point, bond buyers will realize inflation is back and panic. After all, even though inflation never got above 14% in the 1970s and 1980s, long-term bond yields got to 15%. For bond yields to move that high from here, bond prices would have to fall an awfully long way.

• Federal Deficit — with the real cost of the $787 billion TARP “2009 Stimulus” translating into a $1.6 trillion deficit we are now struggling with, the United States has never run a deficit of anywhere near this magnitude and it’s becoming obvious that trillion-dollar-plus deficits are here until at least 2013. That’s another reason for the bond markets to panic — and is another reason to fear a bond market collapse.

If bond yields rise 0.25% when the Fed is buying 70% of the bonds and keeping interest rates artificially low, those yields will experience a stratospheric zoom after June 30, when Bernanke’s “QE2” bond-purchase program comes to an end. You will probably see a continuing creep upwards in bond yields, perhaps reaching 4% on 10-year Treasuries by early June.

When the Fed starts fighting inflation properly, which will be worse than in the 1970s and won’t happen until next year, the bulk of the bond market collapse will be evident.

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