What’s Wrong with Bonds?

Q: Bonds were once a standard investment – is that no longer the case?

investing bonds, bonds portfolio, bonds vs. goldA: Gold and silver are currently the best investment and wealth hedge compared to stocks, mutual funds, bonds, and cash. In the first 10 years of the 21st century, gold surpassed all other asset classes like bonds, etc. It simply crushed these other classes.

Bonds, on the other hand, have been in a bubble lately and are poised to collapse. In the recent past, bonds increased in value as interest rates were lowered. The problem today is that interest rates can’t go any lower, since they’re nearly at zero. They have only one place to go, and that is up. When rates go up, which is 100% certain, the price of previously issued bonds will decrease, collapsing that market.

The inverse relationship between interest rates and bond values is well known, but not being talked about by the Federal Reserve or Wall Street, despite the fact that the policies of the Fed are setting bonds up to collapse in the coming years.

This collapse of the bond market is as obvious and certain as knowing gravity will pull you down if you jump out of a plane. In order to attract more capital for a hungry federal government, rates on treasuries and bonds will eventually have to rise. Foreign investors are getting increasingly nervous about holding American debt and are starting to cut back. They’re moving to more secure assets like gold and silver. As they do, the government will need to attract new debt holders. Thus, the government will be forced to raise rates, and the bond market will collapse under its own weight.