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Currently the business press is full of references to a supposed "bond bubble". We find this extraordinary. One of the basic rules of bubbles, evident from the experience of technology and equity markets generally, is that nobody tells you when a bubble blows up. So by definition, all the opinions about a bond bubble must be mistaken! Indeed, the bubble test can be safely applied to property, where denial is obvious, which helps to confirm the rule.
All the talk ignores the threat of deflation and the experience of Japan. Once again, uncomfortable lessons are overlooked: the lesson that yields turn up for a few weeks then crash down even further, the lesson that deflation is endemic and unavoidable, the lesson that all policy options fail, the lesson that timescales are beyond the capability of weekly decision making cycles, all these can be learned from Japan by those open to a different point of view.
Markets are governed by mass delusions, delusions that always unravel eventually. So, as on previous occasions, the market is giving you another bite at the Gilt cherry. The best prices are always when people don't want to buy. In another couple of years, you may regret not buying at today's prices.
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