Treasuries headed for another plunge. Here's what to do...

If you're a bond investor, you need to brace yourself for potential losses. Reason: Richard Fisher. He's the president of the Dallas Federal Reserve Bank and a very influential member of the 12-person Federal Open Market Committee (FOMC). That means what he says and thinks is important. Speaking just the other day at the National Association of State Retirement Administrators in Portland, Oregon, Fisher said that the Federal Reserve Bank needs to kick its "monetary cocaine" habit. Fisher is talking about the $85 billion the Fed is spending on its Quantitative Easing program buying US Treasury bonds; he wants to get rid of it faster than the Wall Street crowd is expecting. To quote Mr. Fisher: "I would say that the committee is now closer to execution mode, pondering the right time to begin reducing its purchases." In fact, Fisher suggested that the Fed cut back its bond purchases in September at the next FOMC meeting! Don't make the mistake of assuming that Fisher is the lone FOMC member who feels that way. There are others who agree with him. So what does this mean for you? As we recently saw when bond markets tanked starting in April, even the slightest hint of the Fed tapering its bond purchases can wreak havoc on the bond market. Just consider the chart of one-year bond yields here. They exploded from roughly 1.65% in April to a recent high of about 2.75%. That's one of the biggest jumps on record in interest rates. At Mauldin Economics, we're concerned. Not only does Fed tapering - even the hint of it - mean more bond losses ahead for fixed-income investors, it also means a trap will be set. Many investors, seeing the higher yields, will start plowing money back in to the Treasury market to grab those higher yields - but at precisely the wrong time. That's why we also believe it's now more important than ever before that you know what steps you should take to protect and grow your investment income. To see what steps you should take, click here now. We have them spelled out for you. Best wishes, Mauldin Economics Copyright 2013 Mauldin Economics http://www.mauldineconomics.com/opt-out