One Investment To Avoid At All Costs
As many of you know, Im a penny stock addict. I live for penny stocks. I like digging through and finding diamonds hiding in the rubbish pile. Nothing makes me smile more than buying a stock on the cheap and then watching its value skyrocket.
Thats why I do what I do.
But just the other day, a colleague posed an interesting question What part of the market would you stay away from? I guess he got tired of me telling him how exciting penny stocks are.
It was an interesting topic and one I had to think about.
So, what investment do I give the black mark to?
Looking at the markets – risk, volatility, and stock prices – I knew I could come to only one conclusion. Stay away from bonds! I dont care who you are, right now I believe bonds are a big bear trap just waiting to get sprung.
And its not just certain bonds Id stay away from all bonds!
I wouldnt be buying US government bonds, foreign bonds, municipal bonds, or even corporate bonds. Theyre all a death trap.
And the reason why is crystal clear
First, just look at their prices. Any bonds with a decent yield are being bid up to record highs. Theyre way overbought in my mind. Its good if youve been holding onto bonds for the last few years but you dont want to buy at the peak with new money.
The second reason to avoid bonds comes from our global economy. The world over, every economy is struggling. Even the white hot Chinese market looks to be slowing down. When it comes to the US and Europe, it looks even worse.
Heres the problem the central banks of the world are trying to fix the sluggish economy.
Every central bank is trying to over-stimulate their economy. They can only do this by deflating the value of their currency (and making money cheap to borrow) by printing as much money as possible.
Do you see the problem here?
While the economic stimulation might be good for businesses, its bad news for bonds!
Right now interest rates are at record low levels. Might they go lower? Sure. But over the next few years, they will have to snap back to more reasonable levels and that means plummeting bond prices.
The other problem
With all the easy money policies and money printing, the central banks are creating inflation. They may not admit it, but the more money they print, the more inflation they may cause. Just look around, youre seeing it already in your food and gas prices.
Inflation creates a whole other group of problems
And their solution is simple increase interest rates. In other words, eventually rates will be forced higher and it will cause bond prices to tumble. Thats why I dont own any bonds in my portfolio today.
Until next time,
Brian Walker
Category: Penny Stock Tips
