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Rekenthaler Report

Once Again: Are Bonds a Bubble?

On bubbles, balanced investing, and Rekenthaler's latest fail.

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What's a Bubble?
Some popular financial phrases have a precise definition. Bear market, for example, has the strict meaning of a stock-market loss exceeding 20%, in addition to the informal sense of "it seems as if every day is down." Similarly, leverage can be used generally to convey a high level of exposure to an asset, or it can be calculated to the percentage point.

Bubble, on the other hand, resists such precision. To paraphrase former U.S. Supreme Court Justice Potter Stewart, as with pornography, a bubble cannot be measured; instead, we are supposed to know one when we see it. Of course, we often see things in different ways. For example, per some critics of the bond market, the U.S. is now in the midst of a bond bubble, while for other critics bonds are not a bubble, they are merely expensive.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.