Bond Market Tremors = Why Banks Don’t Trust Banks

Today I have two scary questions for you…

First, how safe is your bond fund?   And second, how do you protect your investments (bond funds) during a market crash?

Think about it for a minute.

How often do you think about your bonds?

Most people focus on the stock market.  But if the bond market crashes what do you do?  Call your broker and sell…do it yourself online?  Or do you wait and see?

And what happens if your fund WON’T let you sell?  (That’s like someone yelling “Fire” in a crowded theater…everyone runs for the exit and no one can get out).

This may seem like something out of the Twilight Zone.  But it’s happened before.  And it’s likely to happen again.

Now here’s the bad news.

In a crash, two things happen…and neither one is good:  1) Prices fall in a flash and 2) fund managers can’t sell fast enough to keep up with the liquidations.

It gets ugly really quick because #2 accelerates #1.

To make matters worse, Wall Street has been quietly passing laws that allow fund managers to freeze their accounts from liquidations.

Yep…you read that right.

You might not be able to get out at all.

Let that sink in.

Adding gasoline to the REPO Crisis fire – which no one seems to want to talk about – Lebanon is likely to default on its bonds and soon.

This will only intensify the increasing liquidity among Emerging Markets.

It’s contributing to the REPO Crisis because banks don’t know what bonds other banks are holding.

Consequently, Banks Don’t Trust Banks.

Things could get real ugly real soon…maybe even this week.

Keep your eyes on Europe…they’ll be the first domino to fall.

And be sure to read our February newsletter to learn how to protect yourself.