He elaborated on the carry trade bond bubble, and why the Fed may have interfered.
FORBES: Get Briefed: Lehmann Says Government Is Hiding True Motives
This bond bubble is not only for Treasuries and corporate debt, but across the yield spectrum.
Spiking rates (which move inversely to price) are powerful evidence that the bond bubble has finally burst.
Lately pundits are shouting from their megaphones that high-yield bonds are overvalued and the bond bubble is ready to burst.
When the bond bubble bursts, it will be just as ugly as the collapse in housing and the stock market proved to be.
But investors probably need to be aware of the potential that it is a bond bubble, and be prepared to bail out early when rates and yields begin rising, or if the stock market bottoms and begins a new leg up.
We left this story last month with the happy expectation that Fed Chairman Bernanke was going to be deflating the carry trade bond bubble, bring long term interest rates in line with inflation expectations, stimulate bank lending and thereby create economic growth.
When Steve Forbes asked Roubini whether we were seeing a municipal bond market bubble in January, Roubini clarified his stance.
FORBES: Muni Talks: Roubini And Lehmann Say Get Out Of Municipal Bonds
The bond market bubble is beginning to burst and although a further round of QE could prolong that from happening, it will create a much greater bubble in the future.
While Marilyn is willing to cherry pick junk bonds for some juicy yields at short maturities, she has also been telling investors that a bond fund bubble is forming and that it will pop soon.
Needless to say, a near doubling of the U.S. national debt suggests that the endgame to this crisis is going to eventually bring much higher interest rates and a collapse in today's bond-market bubble.
Naturally, this leaves investors wondering whether or not a bubble formed in the bond market and, if it has, what will be catalyst for this bubble to burst?
This leads to the conclusion that retail bond investors are causing a bubble in junk bonds.
The Federal Reserve helped create the bubble in the housing market by keeping interest rates too low for too long and is now creating another bubble in the bond market.
FORBES: The Limits Of Monetary Policy Call For Moral, Sound Money
These days focus is squarely on the bond market as the flashpoint where a bubble could burst.
FORBES: It Started With Tulips, Now Bubble-Watchers Are Looking To The Bond Market
More likely, the Fed is creating another asset bubble, this time in the bond markets.
FORBES: The Fed Has Forgotten Sound Money, And Now Just Manipulates Interest Rates
Out of the many things the housing bubble and subsequent financial crisis marked with the scarlet letter, monolines, or bond insurance companies, have become one of the last to finally fall from grace.
FORBES: Left Overs of the Financial Crisis: Last Monoline to Lose AAA-Rating
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