Retail investors just can’t stop doing what they’ve been trained to do, which is to follow each and every twist and turn in the headlines, buying when the media tells them to and panic-selling for a loss when the trade goes sour.
They could avoid these losses by following the smart money, which consistently outperforms retail traders because billionaire investors have better research, more data, and decades of experience in the markets. And today, the smart money is seeing signs in the corporate bond market – signs that say, “Trouble Ahead.”
Top-ranking hedge-fund managers like Doubleline’s Jeff “Bond King” Gundlach, Guggenheim’s Scott Minerd, and PIMCO’s Dan Ivascyn aren’t buying the risk-on hype that the government’s been selling to the public. An overpriced stock market, combined with the bond bubble is making them uneasy, no doubt, but it’s the corporate-bond time-bomb that concerns them the most.
BBB-rated bonds, which are barely above the “junk” level, are a speculative instrument at best and a pre-collapse indicator at worst – we saw them selling like hotcakes just before the horrendous market crash of 2008, and unfortunately history is repeating itself as investors simply refuse to learn their lesson.
Of course, the Federal Reserve is aiding and abetting this ultra-risky behavior; bond investors are desperate to find income in a ZERO-yield world. Even 30-year Treasurys can’t keep up with inflation, so investors are forced to turn to the lowest level of investment-grade bonds (BBB) even while levels of junk debt remain stable:
But junk and BBB bonds are the landmine-filled playground of gamblers, not successful billionaires like Jeff Gundlach, who has been warning us of asset bubbles in both stocks and bonds. As prices are utterly decoupled from fundamentals amid a global economic slowdown, Gundlach and other smart-money investors are preparing for seismic shocks to the system.
I called this on multiple occasions: billionaires would be the first ones to sound the alarm on a fragile economy even while retail traders continue to panic-buy everything in sight.
The world’s best investors are all scaling back their risk exposure, avoiding corporate bonds altogether and sticking to shorter-duration government bonds, if they’re holding any bonds at all.
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Nothing will stop the Federal Reserve from promoting risky behavior and suppressing bond yields. Their sole purpose is to keep interest payments on the national debt as low as possible while propping up the stock market in the short term. Long-term economic concerns aren’t on their radar, nor are the retirement accounts of middle-class investors.
Billionaires are taking positions in hard assets, which are virtually guaranteed to appreciate in value as the Fed pushes bond yields to zero or negative territory:
Gold stands to thrive – there’s much more upside to come for precious metals. This bull market in gold has plenty of months and years ahead of it.
The central bank rate-cutting spree will continue and the corporate debt bubble could persist for a little bit longer, but it’s already at RECORD HIGHS in terms of debt/GDP ratios.
Follow the trail of the smart money investors and position for a precious metals super-cycle.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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