As always, I wish the people saying we should be "very afraid" of a bond bubble would say
who, exactly, should be "very afraid?" Retail investors in an ordinary "core" bond fund, intermediate-term, investment-grade, like Vanguard Total Bond? Because they are scaring those people.
I wish they would say
what, exactly, in percentage dollar loss, we are supposed to be "very afraid" of? Losing half our money, like we could in stocks? Or losing 5%, which we could have avoided by just putting it in the bank, a bummer to be sure but nothing to lose sleep over.
I wish they would say whether the loss we should be afraid of is a temporary loss with recovery within the period suggested by the fund's duration, or not--and if not, why not?
And, desperately I want to know what the heck he means by "
comparable to what happens in the stock market during an equity bubble." Comparable how?
Let's say we're just eyeballing the share
price (i.e. the principal or capital, as opposed to the income) for Vanguard Total Bond. For the sake of argument, let's say it might be +10% above what it should be. After all, the price per share was $10 when the fund was launched in 1986.
Source: Morningstar
How is this "comparable" to an equity bubble? Here, the share price for Total Bond (green) is plotted on the same scale as QQQ, the ETF that tracks the NASDAQ-100 (orange). I don't see the two as "comparable" in any way.
And finally, as you can see from my snarky annotations... is this different from what already happened once, in 2010, and if so, how? In 2010, Jeremy Siegel and Jeremy Schwartz warned of a "Great American bond bubble" that was "similar" to the Nasdaq bubble, but "may have far more serious consequences for investors." It would happen "If over the next year, 10-year interest rates, which are now 2.8%, rise to 3.15%" in scenario, 4% in another. In fact it did rise to 3.71%, well into the range they warned about. The chart shows what happened. (I actually emailed Professor Siegel to ask whether or not this met the conditions he predicted would have more serious consequences than the Nasdaq collapse, but he did not reply).
So, what are we supposed to be "very afraid" of? Another 2010-2011?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.