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Bernanke right on equities but wrong on bond bubble?

Posted on 27 February 2013 with 2 comments from readers

Investment bubbles are always obvious right? Well this report from Bloomberg TV shows where the next bubble has formed. It’s not in equities or housing this time.

Fed chairman Ben Bernanke is right on that. But he is wrong about there being no bubbles in financial markets. Just look at the bubble in bonds and that’s very dangerous…

Posted on 27 February 2013 Categories: Banking & Finance, Bond Markets, Investment Gurus, US Stocks, Video Channel

2 Comments posted by readers:

Comment by John Mark - 27 February 2013

Well, it’s bloomberg official now: Gold is not in a bubble!

Bernanke and Bloomberg agree that commodities are not in a bubble, so that any anti-bullion stockbroker, advising his clients that it is, has got a personal agenda of salary preservation in mind.

The bond bubble makes an impressive chart. When it blows up, like a supernova, will it not drag other things down with it, like a supernova?

Shares will wobble, won’t they, yet the vast amount of QE money might well come flooding out when the bond bubble bursts. Where will it go to? Currency? Shares – not all of it, surely?

Some of it will go into bullion, I believe.

Ed Note: I disagree with Bernanke. Shares are in a bubble because they pay dividends that only look reasonable due to low bond yields. If bond yields go up then share dividends also have to go up and the only way for that to happen quickly is for share prices to go down!

Comment by John Mark - 28 February 2013

So, Bernanke IS a “propaganda machine” imparting to the world the ideas that the US must have to keep it peaceful.

There is no way that Bernanke doesn’t realise that share dividends will have to go up if bond yields do. There is no way that Bernanke doesn’t realise that if share dividends go up to match bonds yields, then share prices fall.

But Bernanke wants peace in the US of A, so he tells us what will act like oil on troubled waters.

He denies a bond bubble, in spite of the clearest evidence to the contrary, so that he can say that the stock market is not over-valued. HE is not going to be the cause of a stock market crash.

Mind you, I don’t really blame him for wanting peace or for not wanting to be seen for ever and ever as the trigger of a stock market crash, which will surely exceed the 1929 one in global severity. I would, in his position.

But what he said to Congress was flagrantly untrue! Did any congressman pick this up or are they in thrall to this great professor of the 1930s?

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