Bond bubble bust

Jonathon M. Trugman

There goes the nest egg.

There’s a record $16.3 trillion of US debt and a good portion of that is sitting in baby boomers’ portfolios like a ticking time bomb ready to explode, and most investors know little about it.

“It’s my worst nightmare,” says a long-only bond fund manager. “There’s nothing I can do — the checks come in [from clients] every day, and I have to invest it.”

With Ben Bernanke’s debt paper floating through the market and the Fed chief vowing to keep rates low until 2015, some bond managers are hoping to get out before the bubble bursts and Armageddon hits.

And rates would not have to go through the roof to take out billions in principal for investors, most of whom are in bonds because they are nearing retirement.

“If the 10-year [bond] goes up 100 basis points, that could mean more than $35 billion is lost,” says one bond trader.

One hundred basis points is just a 1 percent increase, which would put the 10-year at about 2.6 percent. The average rate of return over the last decade is roughly 4 percent, which, if we return to that yield, could put principal losses close to $500 billion, says a bond manager.

Bond prices (your principal) and interest rates (yield) move in opposite directions. When rates rise, bond prices fall. The inverse is, of course, true as well. When rates fall, the price (your principal) of the bond rises.

The problem today is that short-term Federal Reserve funds rates are pegged at zero percent. In addition, the Fed’s irresponsible bond-buying spree, dubbed QE, has driven even long-term rates insanely low, to 1.5 or 1.6 percent on the 10-year Treasury.

Without rewriting arithmetic, rates have nowhere to go but up — and, eventually, up quite a bit. And the principal invested in bonds will fall substantially.

Most older Americans have done their part, putting away a little bit each month towards their retirement, cutting back on household budgets and selling their riskier equity investments in favor of “safer” US Treasury bonds.

Well, that’s where they may have gone wrong. While most financial advisers still steer their near-retirement clients into bond funds, these are extraordinary times where the latest bubble — bonds — is about to explode, just like the two previous bubbles.

The Fed’s bizarre move “forward” into a massive multitrillion-dollar bond-buying binge has left all investors more vulnerable today than they were in 2000 after the Internet bubble, or the housing-bubble bust in 2008.

Investors implicitly understood that there were certain levels of risk inherent in Internet/technology stocks in the beginning of the dot-com economy, where an idea and a sock puppet could garner a $100 million market cap. The same applied a few years later, when investors saw the price of their homes double over three years on nothing more than easy credit and lax regulator supervision.

But sadly, few Americans understand just how risky bonds are at this very moment. For generations, investors have looked to US bonds/Treasuries as “low-risk” savings instruments, almost like a bank CD. Bond losses were always something that happened in other countries like Argentina, Greece or Portugal, not America.

It is not as complicated as some would pretend, but it is extremely important for all to understand — especially those planning on retiring soon. Pension plans, 401(k)s, annuities, IRAs — retirement vehicles have never been more at risk than they are now.

Most Americans don’t spend their time trying to comprehend the likes of quantitative easing or yield curves. That’s what the bureaucrats get paid for.

However, everyone recognizes that they earn next to nothing on their money today, either in the bank or in other interest-rate-based products like bonds and money-market funds.

They also know that “something” is clearly not right. That intuitive “something,” that recognition, is all-telling. The Fed has forced the bond market into unchartered and very unsafe waters.

With Social Security, Medicare and Medicaid all on the chopping block because Washington overspent and mismanaged itself, retirement savings are even more important.

So after manipulating the bond market to bubbly levels that even Dom Perignon would be proud of, we have virtually no economic benefit to show for it.

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Is the electric car dying again?

A second administration of President Barack Obama will be forced to revisit the issue of subsidies for renewable energy and, with it, those for electric vehicles. Despite the millions of dollars spent on government incentives, marketing and promotion, sales of fully electric cars are well below projected targets. Investment in vehicle charging infrastructure also has fallen victim to budget cutbacks, limited usage and concern over the return on money spent.

Indeed, only last month, a leading automotive battery manufacturer, A123 Systems, was forced to declare bankruptcy. And the founder and CEO of Better Place, Shai Agassi, whose company (in which I was employed) promotes all-electric vehicles with batteries that can be both charged and replaced, was himself replaced due to low sales figures and high capital expenses arising from the deployment of battery-switching stations.

As a result, the question is now being raised: Are we again bearing witness to the death of the electric car?

Any such conclusion over the longer term may be premature. With declining costs and gradually improving technologies that can extend battery range beyond its current limitations, the electric car continues to hold promise. Rising gasoline prices and potential disruptions in oil supply favor alternative sources of energy.

To achieve mass market adoption, however, cars running on electricity — or any other alternative energy source — must satisfy the three “C’s”: cost, convenience and connectivity.

Few buyers are able or willing to pay more for a car running on clean energy unless the upfront cost of the car roughly equals or is below its carbon-powered alternative. Advertised savings over time in powering a car using alternative “fuels” so far have failed to persuade the average driver to buy. And while government subsidies play a role in reducing initial costs to consumers, such incentives so far have not been sufficient to attract large numbers of drivers to switch to electric vehicles.

Cars driven solely or partially by electricity or other alternative energies also must be at least as convenient as those powered exclusively by internal combustion engines. Drivers appear unwilling to sacrifice the expected hundreds of miles in driving range between refuelings. Likewise, drivers demand refueling times equal to what they are accustomed — about five minutes at the gasoline station.

Further, there must be adequate infrastructure in place to enable large numbers of drivers to connect to an alternative energy source before that source can be widely adopted. While a scattering of drivers simultaneously connecting to a power grid may not have much impact, large numbers of drivers doing so can cause major power outages that escalate absent the real-time balancing of energy loads across the network. Moreover, the environmental impact of the connected cycle between car and infrastructure, often referred to as the “well-to-wheel” balance, has to result in less pollution overall for alternative energy vehicles to achieve significant market traction.

Until the fully electric car can satisfy all three C’s, any assessment of projected vehicle sales must reflect a variety of energy sourcing options, both traditional and alternative, all competing for market share.

Gasoline and diesel likely will remain the predominant source of energy in the foreseeable future for new car buyers, with hybrid vehicles that run on both petroleum and alternative energy sources taking an increasingly larger share of the market. Although more costly than pure gasoline-driven cars, hybrids do offer a more environmentally friendly solution and provide the driving range demanded by car buyers.

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West Miami-Dade hit-and-run driver convicted, awaiting sentencing

Almost four years after a hit-and-run driver killed her 11-year-old daughter, Adonay Rosete will enter the holiday season with some semblance of closure.

That’s because a jury this month convicted the driver of two felonies in the death of 11-year-old Ashley Nicole Valdes, who was struck in January 2009 in West Kendall after a bus driver dropped her off on the wrong side of the street.

The driver, Harvey Abraham, 37, was convicted of leaving the scene of an accident involving death and tampering with evidence.

He will be sentenced early next year, and faces from two to 35 years in prison.

“The trial was just very hard because it took me back to that moment of her death. He took two lives that day. The dead are dead, but the living are the ones who stay behind suffering,” Rosete said this week. “But after three years, it’s closure.”

Ashley’s death spurred Miami-Dade County to implement an “Ashley Alert” text-message system for which county residents can sign up to receive alerts on crime and traffic issues. The alerts are intended to spread the word on crimes such as hit-and-run accidents like the one that killed Ashley.

In March 2009 — in a ceremony featuring dozens of the girl’s classmates — county officials also renamed the portion of Southwest 80th Street where Ashley died after her.

Ashley had just started sixth grade at Howard Doolin Middle School in West Kendall. Her mother also cares for her younger daughter, Amanda Batista, who suffers from Angelman Syndrome, a condition similar to cerebral palsy.

Ashley was killed Jan. 8, 2009, when a substitute school bus driver dropped her off on the wrong side of the Southwest 80th Street in West Kendall. She was crossing 80th Street when a Ford F-150 plowed into her, hurling her body 80 feet. Her family later received a settlement from the Miami-Dade school district.

Two school-age sisters in a nearby car witnessed the accident.

At the time, Abraham — a father of two daughters — worked as an administrative assistant at an accounting firm. He took his truck to a body shop, and even filed an insurance claim, saying he was the victim, prosecutor Suzanne Von Paulus told jurors at his trial.

As Miami-Dade traffic homicide detectives searched for the truck and fielded more than 70 tips, Allstate insurance inspected the vehicle and mailed a check to Harvey for the damage.

While the partially disassembled truck sat outside a South Miami auto body shop, a citizen — who heard about the case through the news media — called police. The shop’s owner, working with police, called Abraham to the shop under the pretense that he needed to sign more paperwork for the repair job.

Detectives arrested Abraham, who claimed he thought he had struck a dog. Jurors took 25 minutes to convict him.

“The whole thing is tragic. There was nothing he could have done to avoid this accident,” said his defense attorney, David Donet. “From the beginning he said he never realized what he hit. But he is really devastated by what happened to Ashley and is very remorseful.”

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Larry Hagman Dies

Larry Hagman, best known for playing Dallas villain J.R. Ewing, died Friday morning from complications stemming from his recent battle with cancer.

He was 81 years old.

Video: Larry Hagman Talks 'Dallas', Cancer and Veganism

"Larry was back in his beloved Dallas, re-enacting the iconic role he loved most," the family said in a statement via The Dallas Morning News. "When he passed, he was surrounded by loved ones. It was a peaceful passing, just as he had wished for. The family requests privacy at this time."

Hagman's Dallas co-stars Linda Gray (who played his wife Sue Ellen) and Patrick Duffy (who played his brother Bobby) were reportedly at his bedside when he died, The Sun is reporting.

"Larry Hagman was my best friend for 35 years. He was the Pied Piper of life and brought joy to everyone he knew," Gray tells ET in a statement. "He was creative, generous, funny, loving and talented, and I will miss him enormously. He was an original and lived life to the fullest ... The world was a brighter place because of Larry Hagman."

Video: J.R. Menaces in New 'Dallas'

Hagman, who also starred as Air Force Captain Anthony Nelson in I Dream of Jeannie, was last seen on television in TNT's Dallas reboot, where he returned to play his most well-known character.

"Larry Hagman was a giant, a larger-than-life personality whose iconic performance as J.R. Ewing will endure as one of the most indelible in entertainment history," Warner Bros., Dallas executive producers Cynthia Cidre and Michael M. Robin, and the show's cast and crew said in a statement. "He truly loved portraying this globally recognized character, and he leaves a legacy of entertainment, generosity and grace. Everyone at Warner Bros. and in the Dallas family is deeply saddened by Larry's passing, and our thoughts are with his family and dear friends during this difficult time."

"It was truly an honor to share the screen with Mr. Larry Hagman," Dallas reboot star Jesse Metcalfe, who plays Christopher Ewing, said in a statement. "With piercing wit and undeniable charm he brought to life one of the most legendary television characters of all time. But to know the man, however briefly, was to know a passion and dedication for life and acting that was profoundly inspirational."

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Sitcom star Larry Hagman dead at 81

AP Photo/NBC, file

Barbara Eden, left, and Larry Hagman in a scene from the hit 1960s TV show "I Dream of Jeannie."

LOS ANGELES — Larry Hagman, whose predatory oil baron J.R. Ewing on television's long-running nighttime soap opera "Dallas" became a symbol for 1980s greed and coaxed forth a Texas-sized gusher of TV ratings, has died. He was 81.

Hagman, who returned as J.R. in a new edition of "Dallas" this year, passed away Friday afternoon due to complications from his battle with cancer, according to a statement from the family provided to The Associated Press by Warner Bros., producer of "Dallas."

"Larry was back in his beloved hometown of Dallas, re-enacting the iconic role he loved the most," the family said. "Larry's family and closest friends had joined him in Dallas for the Thanksgiving holiday."

Hagman was diagnosed in 1992 with cirrhosis of the liver and acknowledged that he had drank heavily for years. In 1995, a malignant tumor was discovered on his liver and he underwent a transplant.

Years before "Dallas," Hagman had gained TV fame as a nice guy with the fluffy 1965-70 NBC comedy "I Dream of Jeannie," in which he played Capt. Tony Nelson, an astronaut whose life is disrupted when he finds a comely genie, portrayed by Barbara Eden, and takes her home to live with him.

He also starred in two short-lived sitcoms, "The Good Life" (NBC, 1971-72) and "Here We Go Again" (ABC, 1973). His film work included well-regarded performances in "The Group," ''Harry and Tonto" and "Primary Colors."

But it was Hagman's masterful portrayal of the charmingly loathsome J.R. that brought him his greatest stardom. The CBS serial drama about the Ewing clan and those in their orbit aired from April 1978 to May 1991.

The "Who shot J.R.?" story twist, in which Hagman's character was nearly murdered in a cliffhanger episode, fueled international speculation and millions of dollars in betting-parlour wagers. It also helped give the series a ratings record for the time.

When the answer was revealed in a November 1980 episode, an average 41 million viewers tuned in to make "Dallas" the second most-watched entertainment show of all time, trailing only the "MASH" finale in 1983 with 50 million viewers.

It was J.R.'s sister-in-law, Kristin (Mary Crosby) who plugged him — he had made her pregnant, then threatened to frame her as a prostitute unless she left town — but others had equal motivation.

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‘App economy’ potential sizzles

Raymond Gonzalez, a Florida International University senior, is developing an iPhone application called Pet Finder that will allow users to browse the dogs and cats at the local animal shelter or request an animal for adoption. He is also part of a team creating mobile apps that track bank failures, issue alerts about earthquakes and organize homework assignments.

It’s a well-calculated effort to learn as much as he can about mobile technology as quickly as possible. “My goal is to make all these apps free and open source while using the knowledge gained to build my startup company after graduation,” said Gonzalez, who is majoring in information technology.

Whether he starts his own company or works for someone else, Gonzalez is preparing to be a player in a high-paying, sizzling new industry, one that might provide the United States with a big opportunity to increase its exports in coming years.

While the overall economy still lags, the “app economy” has created nearly 500,000 jobs in the United States since 2007, when there were none.

Companies even worry that the nation isn’t moving fast enough to produce new talent for thousands of unfilled jobs as consumers demand more and more gizmos and gadgets for their smartphones.

As a result, salaries are rising quickly: Mobile apps developers can expect pay increases of 9 percent next year, among the highest of any jobs, putting them in the range of $92,750 to $133,500 a year, according to a survey that the staffing and consulting firm Robert Half International released last month.

If the United States can maintain its dominance in the industry, many say the app economy could make a big dent in the country’s federal trade deficit. Last year, for example, more than 20 percent of the apps downloaded in China were made by U.S. developers.

“There is unprecedented opportunity for America to capitalize on exploding international markets,” Peter Farago, the vice president of marketing for Flurry, a high-tech startup in San Francisco, testified in September before the House Subcommittee on Commerce, Manufacturing and Trade.

Farago said his company had more than 100 employees and 50 open positions and that “we literally cannot find the talent we need fast enough.” He told members of the subcommittee that the app economy would become increasingly international and that the United States should do more to improve education and retraining programs and to make it easier for companies to bring and keep more talent from foreign countries.

“We’re in a human capital crunch,” added Rey Ramsey, the president and chief executive officer of TechNet, a network of technology executives that promotes the industry.

According to a TechNet study released earlier this year, the 466,000 mobile-tech jobs created since the iPhone was introduced include programmers, designers, marketers, managers and support staff for Apple, Android, Facebook and other platforms. California is by far the most dominant player in the industry, accounting for nearly one of every four jobs. New York ranks second, followed by Washington state, Texas, New Jersey, Illinois, Massachusetts, Georgia, Virginia and Florida.

Among metropolitan regions, New York ranked first, followed by San Francisco-Oakland-Fremont, San Jose-Sunnyvale-Santa Clara and Seattle-Tacoma-Bellevue. Miami-Fort Lauderdale ranked 19th.

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Wayward turkeys trot to freedom in the Keys

Pulling off the poultry version of "The Great Escape," two turkeys — very much alive — found freedom in Key Largo a few days before Thanksgiving.

The pair of fully grown gobblers was spotted darting into the southbound lanes of U.S. 1, not far from Key Largo School, in the middle of the day.

"We've gotten calls about goats and even a kangaroo," said Marsha Garrettson, manager of the Key Largo Animal Shelter for nearly two decades. "These are the first turkeys."

Animal Control Officer Mike Coleman and a volunteer bystander staged a turkey roundup to take the birds into protective custody.

How the turkeys turned up on Key Largo is unknown. But it doesn't stretch the imagination to assume they were someone's notion of a farm-fresh Thanksgiving dinner.

If so, the turkeys had other plans. "Maybe they escaped," Garrettson said. "Happily escaped."

As founder of the local Humane Animal Care Coalition and a supporter of People for the Ethical Treatment of Animals, Garrettson did not try to find the owner.

"Live turkeys are considered livestock," she said. "And it's basically illegal to have livestock in Monroe County."

The big birds, one black and one brown, appear to be fast friends. "They follow each other around," Garrettson said. "They've bonded."

Concerned that the plump birds might prove a tempting target around this holiday time, the turkeys were held overnight inside under lock and key rather than an outdoor cage.

The turkeys were delivered to a petting zoo in Broward County. Instead of being the main course on Thanksgiving, they'll live out their lives as farm-life ambassadors to schools and children's events.

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Gabriel Aubry and Olivier Martinez Involved in Brawl

Halle Berry's ex-boyfriend Gabriel Aubry and her fiancé Olivier Martinez were involved in a Thanksgiving altercation that turned physical, with Aubry having to be transported by ambulance to the hospital due to injuries, ET confirms.

Cops responded to a 9-1-1 call at 10 a.m. at Berry's house, and according to police sources, the fight broke out when Aubry was dropping off his daughter with Berry, Nahla, 4, to her house for Thanksgiving. Aubry reportedly initiated the altercation and was arrested for misdemeanor battery.

Related: Halle Berry & Gabriel Aubry's Custody Battle Heats Up

He will be booked when/after he is released from the hospital.

Related: Berry -- My Love for Olivier Was 'Gradual'

Just Wednesday afternoon, Aubry, Berry, Martinez and Nahla were all seen together attending a pre-Thanksgiving party in Los Angeles.

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Surf's up, Jennifer!

Playing the butt-kicking, arrow-shooting hero of “The Hunger Games” has certainly paid off! Jennifer Lawrence, known to fans as Katniss Everdeen, flaunts her toned bikini bod while surfing in Hawaii. The star, 22, was taking a break ahead of filming for the franchise’s sequel, “Catching Fire.”

Splash News

Jennifer Lawrence

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Black Friday in South Florida: Dispatches from the front of the line

7 AM Aventura Mall Some customers from China rushed into Abercrombie — and stopped in shock upon seeing a shirtless man greeting customers.

“We don't do this in China,” said Sherry Guo, 29, as her friends giggled.

5:45 AM Aventura Mall Macy’s was open but the entrance to the mall from the department store was closed. The mall opens at 6. Customers could not get into the Mall from Macy’s before 6 and had to walk outside to one of the mall entrances. An employee and a security guard said that was a mistake. Cars started backing up on the mall perimeter road, but plenty of parking spaces were still available. Around the corner from the mall, three Aventura police cars, lights flashing, were stationed next to a sign warning drivers to wear a seatbelt or face a ticket.

3:20 AM Dadeland Mall Most shoppers are standing in line for coffee at Starbucks, eating Bourbon chicken from Kelly’s Cajun Grill, munching on a pretzel from Auntie Anne’s or taking a cat nap. Those leaving are carrying bags from Macy’s, the Disney Store,

Bath and Body Works, and Victoria’s Secret.

Maria Prado, the mall manager, said she is "very impressed" with the Black Friday turnout.

"This is a critical day for retail," Prado said, of Kendall. "We are in this business to cater to what shoppers want."

2 AM, Dadeland Mall The mall is still packed with people. Many of them are gathered in the Disney Store, Victoria’s Secret, Bath and Body Works and Macy’s. The Apple store, which had a line of nearly 150 shoppers waiting for the door to open at midnight, now only has a line of about 25 shoppers. Instead of opening at midnight, Apple is opening at 6 a.m.

At Victoria’s Secret, the security guard fell asleep standing while nearly 100 shoppers were making purchases. Husbands and infants slept outside of the store on brown couches.

12:30 AM, Dadeland Mall All retail stores were expected to open at midnight. But as of 12:30 a.m., neither the Apple store nor jewelry stores Tous or Mayors were open. Nearly 150 people were waiting outside of Apple.

According to Guest Services, stores that were not open by midnight would be fined.

Meanwhile, the rest of the mall buzzed with eager families and couples. Many shoppers were already sporting bags from Macy’s, Victoria’s Secret, Express and Abercrombie & Fitch.

12:06 AM, Dadeland Mall Dadeland Mall officially opened at 12 a.m., and by 12:06 a.m. a group of young girls were already walking out of the mall with Victoria’s Secret bags in hand.

As the doors opened at Abercrombie & Fitch, people shouted to get in. Some yelled "Hallelujah" as others tried to push their way through.

Friday, midnight, Sawgrass Mills After a moderate start, the pace picked up at Sawgrass Mills. By midnight the mall was packed. Human traffic jams made walking through corridors challenging. Parking lot spaces were gone by 11 p.m., and people were being sent to the BB&T center and shuttled over to the mall. Food courts were doing brisk business as shoppers grabbed a quick bite to refuel.

11:45 PM, Dolphin Mall, Gaspar Ferreiro headed to the mall Thanksgiving night to shop, and to sell. Waiting in line at the Swaroski jewelry store, the Georgia resident had a promotion of his own to offer. A sign hand-written in marker and hanging from a string on his back read: “FOR SALE WII DELUXE FOR $465.”

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