It sounded like a great plan, at least to the central planners at the Bank of Japan. The basic idea?
- Print the most money, on a relative basis, of any central bank … in any country … at any time in history …
- Pledge to take that money and buy up 7 trillion yen per month in bonds all the way out to 40-year maturities, as often as eight times a month …
- Watch as bond prices rise, bond yields fall, stock prices rise, inflation expectation and wages rise, the economy booms, and investors all ride off into the sunset on the backs of happy rainbow unicorns.
There’s just one problem: The plan is back-firing miserably in the Japanese bond market. Rather than rise in price, bond prices are tanking. So rather than drop, interest rates are jumping.
|BOJ’s stimulus plan backfires; sending interest rates higher.|
Japanese Bond Chaos Riling Bond Markets
Around the World —
Just take a look at this chart of the PowerShares DB 3X Inverse Japanese Government Bond Futures Exchange Traded Notes (JGBD). I know the name is a mouthful. But suffice it to say, this ETN is designed to climb in value along with Japanese interest rates.
You can see that the announcement of the BOJ plan this spring has caused Japanese rates — and therefore, the value of this ETN — to rise rapidly.
Not only that, but volatility in the Japanese bond market is surging. That’s because the utter recklessness of the plan and the unprecedented nature of the BOJ’s operations is spooking big money investors.
That volatility surge, in turn, is only fueling more selling because of the nature of risk models that large investors use. Why? Without getting too deep in the weeds, rising volatility in a formerly very stable asset class (like Japanese government bonds) spooks bank and pension fund risk managers. They’re forced to hedge their risk or dump their bonds as a result, producing even more volatility and sparking even more selling.
That selling isn’t staying bottled up in Japan, either. Far from it. The contagion selling is spilling out all over the world, including right here in the U.S.
Just look at what happened to the yield on the benchmark 10-year Treasury Note this week. You can see it exploded above key technical resistance a few days ago, trading to almost 2.2 percent — its highest level in 14 months.
I told you this was coming. If you haven’t
already prepared, don’t wait any longer
The good news? I have repeatedly warned that this kind of market move was coming, so it should come as absolutely no surprise to you. For example …
==> In mid-January, I told you that so-called “safe havens” such as long-term government bonds were an accident waiting to happen. My exact words: “If you’re hiding in bonds, you’re not really safe at all. You’re taking huge risks.”
==> Then in mid-February, I gave you a step-by-step method to neutralize your fixed income risk in an era of rising interest rates.
==> And then in mid-April, I told you that you could find plenty of investments that offer “better than bonds” returns with less potential risk.
So what are my two recommended steps to take now?
First, re-read those columns and get to work on the action plans they contain.
Then second, consider getting your hands on a copy of my recently released report “Beating the Bond Bubble: 6 Bubble-Busting Investments for Income and Profit!“ In this hard-hitting investor intelligence report, you’ll find all of the following — and more:
- 2 critical questions you must ask your fund manager. Plus, the answer he must give you … or else it’s time to cut him out of your portfolio (pg. 16)
- 3 critical steps to protect yourself and profit as the bond bubble bursts (pgs. 15 – 19)
- The safest bond type you should consider buying — but only if you can get it at a discount of up to 50 percent (pg. 17)
- The 3 highest-risk places to park your cash — go through and make sure your wealth isn’t locked up in any of these money traps (pg. 18)
- 4 easy ways for you to go for windfall profits while the bond market implodes. These are highly liquid investments that have nothing to do with options, futures, or even short selling — but that can hand you up to 3 percent in profit for every 1 percent bond prices fall (pg. 19)
- One investment to buy that yields 129 percent more than long-term government bonds plus, 3 rock-solid dividend stocks to grab for steady gains (pg. 22)
- The shocking truth about the bond bubble: Three jaw-dropping charts that tell the whole story in a glance (pgs. 6 – 7)
- A quiet profit-killer that guarantees you’re losing as much as 80 cents for every $1 you put in bonds (pgs. 9 – 10)
- The one fund with yields that beat the S&P 500 Index by almost 2 to 1 (pg. 23)
- How to escape the bond crash and ride the explosion of American energy for yields up to 200 percent better than 10-year bonds are paying (pg. 23)
- A lesser-known type of bond that’s actually insulated against sudden interest rate spikes — and that helps you capture the upside of stocks (pg. 23 – 24)
All you have to do to reserve your copy is click here. Or you can call my customer service team at 1-800-291-8545.
I suggest you don’t wait too long though. The predictions in that report … published just a few short weeks ago … are already coming true. The investments in that report are already on the move. And the potential profits … especially if we get a major meltdown in the bond market … are large indeed.
Until next time,