Shortly after that last post, I found this post from Pragmatic Capitalism (via Reformed Broker). Interesting, if not long-winded, argument against the bond-bubble theory.
One thing I notice upon first glance, though, is that he seems to be a bit picky about the definition of a bubble. Would there ever be decrease on par in magnitude with the Dutch Tulip Bubble of the 1800's? No.
But, will you be pissed off if the long duration piece of your fixed income portfolio gets needlessly smoked because your portfolio manager is worried about underperforming a benchmark by a few bps?I would bet so.
Still, he has an excellent point that perhaps we are throwing around the term 'bubble' a bit haphazardly. Perhaps there is another term that will succinctly (and with a bit of colloquialism) describe an asset that has significantly outrun its fundamental, rational price parameters and is due for a fall? Perhaps I'll just call it Sisyphus at the top of his slope.
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