This article is about Mohamed El-Erian, one of the most powerful and best-connected members of the global monetary elite. El-Erian was a former head of bond giant Pimco and is currently the chief economic adviser for Allianz, one of the largest insurance companies and wealth managers in the world.

He is routinely on the stage at the Davos World Economic Forum, Aspen Ideas Festival and other gatherings of the rich and powerful. His words are taken to heart by other elites. El-Erian is now advising that investors have to reconsider a lot of conventional wisdom about bonds.

We typically hear that U.S. interest rates are “low” but other developed economies such as Germany and Japan have rates that are much lower. When investors declare that U.S. rates are low, they fail to distinguish between nominal rates, which are low by historic standards, and real rates (nominal minus inflation), which are still high for a slowing economy.

El-Erian also points out that some bond markets have overshot in a certain direction, which creates opportunities for investors willing to take some risk to earn much higher returns. He cites Argentina as a case where financial distress is evident but outright default is unlikely.

Investors could make huge returns as Argentinian bonds normalize based on economic reform and IMF support. As for U.S. bonds, it’s critical to get the nominal rate below the rate of inflation in order to create negative real rates that actually could stimulate economic growth. We’re starting to see some signs of this in the housing market (with long-term fixed-rate mortgages now at 3.5%), but the process has a long way to go.

Rates on U.S. Treasury 10-year notes of 0.85% or lower (compared with 1.85% today) are not at all out of the question. Huge capital gains are available to investors who purchase the notes today and ride the yield curve down to projected levels below 1%.

El-Erian urges investors to look at factors such as global growth, U.S. growth and government intervention before declaring the end of the bull market in bonds. The bull market may have far to run.

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