I’ve been hearing from a lot of people saying that the bond market is the next bubble to burst. For the most part I’m a stock and options trader but a chart is a chart and if bonds are truly in a bubble then the long term chart should reflect bubble characteristics. Let’s look at a long term chart of $USB and compare it to POT which is an agriculture stock that was clearly a bubble that needed to burst last year.
As of right now I don’t really see a bubble as I do see a strong momentum chart. Yes there has been a strong bull market in bonds for quite a long time, however for this to go on some type of climax run this will be well into the 200’s before that is even an option, possibly 300’s.
Ways to play this are TLT, IEF, and SHY.
POT is the true definition of a bubble going from low single digits to the mid 200’s in the span of 6 years with most of those gains being realized in about 18 months. It didn’t have a down month from mid 2006 until the end of 2007. Just be aware the next time you hear that bonds are in a bubble and remember that the charts don’t lie.