Listen Closely: “Tick, Tick … Boom!” Wake up, It’s An “Impending Crisis,” Dead Ahead!

By Paul B. Farrell, MarketWatch

InvestmentNews latest cover is so powerful you can actually hear sirens atop a flashing neon billboard, megawarning in huge bold type: “Tick, Tick … Boom!”

A warning: InvestmentNews wants to make damn sure its readers, the 90,000 professional financial advisers who rely on timeliness and accuracy of every INews forecast: “What will your clients’ portfolios look like when the bond bomb goes off?” Get it? Not if but when it happens.

Yes, they do expect the bond bomb to explode and are publishing “a special report on the impending crisis in the bond market.”

Yes, you heard them. “Tick, Tick … Boom!” Wake up, it’s an “impending crisis,” dead ahead. And to punctuate their message, InvestmentNews added an alarming photo of an alarm clock with huge bells, wired to rolled up bonds looking like a stack of dynamite sticks. “Tick, Tick … Boom!”

InvestmentNews is not staffed by a bunch of not alarmists, quite the opposite — conservative, trustworthy and methodical. They know the 90,000 registered investment advisers that rely on them are in turn responsible for advising millions of Americans and managing trillions of retirement assets. Yes, their audience demands reliable forecasts.

So listen closely, we’ll summarize Andrew Osterland’s lead article “Fear Rising With Rates,” along with an interview with Bond King Bill Gross. And INews editorials on “repositioning client money” with “strategies for rising rates.” And a couple of opposing portfolio suggestions: “The case for, and against, stocks.”

The Bull says we’re on “the verge of an even bigger run-up. The bear warns, if you “goal is to avoid losses, stay out of equities altogether.”

Either way, the INews report reads like a Stephen King horror story, and in the background, you hear the ticking … ticking … louder … louder … Boom!”

Bond bubble, dangerous, big, doubled last four years

Since the crash four years ago investors have been wary of stocks and have been putting their money in bond mutual funds. INew’s interview with Gross noted that “assets in bond mutual funds have more than doubled to over $2 trillion.”

Gross reiterated Pimco’s “New Normal” warning: “The future for bonds is a lower-return future than investors have come to assume. Bond investors should be expecting 2% to 3% returns over the future years … bond returns will be lower than expected, but … still better than cash and will provide positive returns.”

Interesting that Gross also warned while interest rates will go up 10-15 basis points annually, “a big spike in interest rates is certainly a worry for bonds, but it wouldn’t be friendly for stocks, either.”

Latest stock bubble even more deceptive, more deadly

Over at Bloomberg BusinessWeek, Peter Coy also picked up on the “imbalance between the Dow and the economy … Bond yields are so low that savers who used to keep their money in, say, Treasurys are being driven into the stock market in search of positive returns. They have no choice.”

Then he borrows economist Roger Farmer’s metaphor of “two staggering drunks connected by a long rope. Sometimes the stock market and the economy go in the same direction, sometimes not. But … it won’t go on forever.” The party will soon be over.

Why? Coy highlights the no-win scenarios of economist David Rosenberg: “If the economy slips into recession, even the Fed won’t be able to keep the market aloft. On the other hand, if the economy finally catches fire, investors will conclude that the Fed’s extreme unction will eventually be withdrawn. They’ll sell bonds in anticipation, driving up interest rates and possibly pushing down stocks.”

It gets worse. Rosenberg doesn’t like what’s dead ahead: “His worry is simply that no one else is particularly worried — that the stock market’s rise has been so steady, calm, and untroubled” and nobody seems concerned.

Read more at http://investmentwatchblog.com/listen-closely-tick-tick-boom-wake-up-its-an-impending-crisis-dead-ahead/#QD8oC19L027i2BpO.99