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    Four Ways to Play the Bond Market Bubble

    To hear the "bond bubbleistas" tell it, the bond market is poised to collapse the second interest rates start to rise.

    But if you're thinking about dumping all of your bonds, you should think again.

    Yes, rates will rise - but not as fast as many analysts are forecasting. What's more, even if rates do increase, the price risk is not as bad as you might think.

    That's why the more appropriate strategy is to simply reorient your bond portfolio, rather than pull out all together.

    Don't get me wrong. I'm not trying to make light of the global financial crisis or our current situation, but people have been calling for an "end" to bond markets, in one form or another, for quite a long time.

    Failed Forecasts

    PIMCO cofounder and fund manager Bill Gross has actually done so twice, most recently dumping all government bonds in early 2011. He's since admitted he was wrong and piled back in. Granted, his business is bonds so he had to, but the point is moot.

    PIMCO investors paid through the nose in lost performance, though. The PIMCO Total Return Fund was up just 3.2% as of August, trailing more than 70% of its peers and lagging the 5.6% return of its benchmark index, according to Bloomberg.

    Meredith Whitney famously called for the $3 trillion muni-market Armageddon in November 2010. Her clock is about up and she's mentioning nothing about her prediction in recent appearances despite turning the bond markets upside down for months.

    Even economist Nouriel Roubini has eaten crow when it comes to bonds. He called for the complete meltdown of everything we knew to be true in 2004, 2005, 2006, and 2007. And while he's since become a media darling, his predictive record is less than stunning. Journalist Charles Gasparino, who investigated Roubini's track record, noted that he couldn't find a "single investor who regularly uses his research."

    My point is not that any of these incredibly smart people were wrong - everybody is wrong from time to time - just that investors risk a lot by not "risking" anything.

    Let me explain.

    No Substitute for Stability

    Fueled by banking blunders and the European banking crisis, U.S. Treasuries have not only risen this year, they've rocketed so high that in August the benchmark 10-year yield dropped below 2% for the first time since 1950 and traded at around 1.96% yesterday (Thursday).

    That means investors who hung in there despite the risks and the hype have enjoyed a nice return from bond appreciation even as they continued to reap the benefits of the yield those bonds kicked off. Those who bailed out did so prematurely and got left behind.

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  • The Coming Bond Market Crash: The Three Moves Every Investor Must Make Since last November, the U.S. Federal Reserve has been buying U.S. Treasury bonds at a rate of about $75 billion a month. That's part of Fed Chairman Ben S. Bernanke's "QE2" program, under which the central bank was to buy $600 billion of the government bonds.

    But QE2 ended yesterday (Thursday), meaning the Fed will no longer be a big buyer of Treasury bonds.

    So starting today (Friday), the U.S. Treasury needs to sell twice as many Treasury bonds to end investors as it had been.

    But the problem is, who's going to buy them?

    Not China, which is diversifying its trillions in assets to get as far away from the U.S. dollar as fast as it can.

    Not Japan, which is trying to rebound from its March 11 earthquake, tsunami and nuclear disaster - and is focusing all its spending on reconstruction.

    And - as we've seen -neither is the Bernanke-led Fed.

    I'm telling you right now: We are headed for an epic bond market crash. If you don't know about it, or don't care, you could get clobbered.

    But if you do know, and are willing to take steps now, you can easily protect yourself - and even turn a nice profit in the process.

    Let me explain ...

    A Timetable for the Coming Crash

    I'm an old bond-market hand myself - my experience dates back to my days at the British merchant bank Hill Samuel in the 1970s - so I see all the signs of what's to come.

    Having the two biggest external customers of U.S. debt largely out of the market is a huge problem. Unfortunately, those aren't the only challenges the market faces. The challenges just get bigger from there - which is why I'm predicting a bond market crash.

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  • The Coming Bond Market Collapse: Three Ways to Dodge the Damage We're on a collision course with the worst bond market collapse in decades.

    The warning signs are as clear as day.

    There's still time to dodge the damage - and even to profit - if you know what to look for.

    But the time to make your move is now...

    To understand the three moves to make now, please read on...

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