Rarely do we investors get a market that we know is overvalued and that approaches such clearly defined limits as the bond market now. That is because there is a limit as to how negative bond yields can go. Their expected returns relative to their risks are especially bad. If interest rates rise just a little bit more than is discounted in the curve it will have a big negative effect on bonds and all asset prices, as they are all very sensitive to the discount rate used to calculate the present value of their future cash flows. That is because with interest rates having declined, the effective durations of all assets have lengthened, so they are more price-sensitive. For example, it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest are embedded in the pricing of all investment assets, that would send them all much lower.

Those words are from the most successful hedge fund manager of all time — Ray Dalio.

When Ray speaks, you should listen. He’s been pulling money consistently from the markets over the last 30 years and has a long record of being right.

There is now more than $13 trillion — that’s trillion with a “T” — of global debt that offers investors a guaranteed loss if held to maturity.

The philosopher Nietzsche would remark (with some slight adjustments by me) “In individuals, insanity is rare; but in groups, markets, and economies, it is the rule.”

Insanity has to be an element in why “investors” would line up for a chance to pay to lend to a government. Should those who partake in this madness still even be referred to as investors? Is that not somewhat of an oxymoron now? Perhaps they should be called “burners” for all the capital they’re destroying?

Anyway, these burners are partaking in what can only be described as the largest game of “Greater Fools” in the economic history of man.

For those of you not familiar with greater fools theory (GTF), you need to be, because it seems to be the logic (or illogic?) at the foundation of our current bizarro capitalistic world.

Wikipedia defines greater fool theory as when “the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price.”

We define GTF as “insanely stupid and endlessly repeated moments in market history when a bunch of idiots start setting their cash on fire because they see other people doing it.”

Or there’s how 19th century editor of The Economist, Walter Bagehot, described it when writing about the 18th century South Sea Bubble. GFT is when “a great deal of stupid people have a great deal of stupid money… At intervals, the money of these people — the blind capital, as we call it, of a country, is particularly large and craving; it seeks for someone to devour it, and there is a ‘plethora’; it finds someone, and there is speculation; it is devoured, and there is ‘panic’.”