Bill Bonner, author of The New Empire of Debt, writing for The Daily Reckoning, analyzes the current state of the bond market, and what current actions imply for the future.

Bill Bonner (The Daily Reckoning):

No, dear reader…it’s not that simple. It never is.

That’s true of almost everything….

The bond market has begun to sell off. The big question is: what does it mean?

Is it A sell-off? Or THE sell-off?

We’ve done well with our simple trade for the last ten years. We bought gold. We sold stocks. But what’s ahead?

Will that be the best trade for the NEXT 10 years too? Or is it time to sell bonds, rather than stocks?

Hmmm….

Stocks have lost value over the last ten years. US stocks were about the worst thing you could own over that period. But what are the odds that they’ll be the worst thing you can own over the NEXT decade too?

Who knows… Historically, it would be unprecedented for stocks to have negative returns over a second 10-year term. That doesn’t mean it won’t happen. But is it a bet worthy of the Trade of the Decade?

Don’t know.

What we’re looking for are the extremes. We want to buy things that have been so beaten down for such a long time that they almost have to go up. And we want to sell things that have been going up for so long that people are sure they’re going up forever.

In 1999, gold was perfect for the buy side. It had been going down for 20 years…while other asset classes and money substitutes soared. On the sell side, stocks were perfect. The Dow had been going up since 1982…and prices had reached levels that could only be sustained by delusions and hallucinations.

But what now?

We have a couple more days to think about it… Stay tuned.

What else?

Click here for the rest of Mr. Bonner’s commentary on The Daily Reckoning.