Nassim Taleb Bets On the Collapse of Government Bonds, Says Investors Should Avoid Stocks

Bestselling author Nassim Taleb, who prior to Lehman’s (LEHMQ) collapse warned that bankers were disregarding the potential for unexpected catastrophes, says he’s “betting on the collapse of government bonds” and that investors should avoid stocks.

Bloomberg:  “I’m very pessimistic,” he said at the Discovery Invest Leadership Summit in Johannesburg today. “By staying in cash or hedging against inflation, you won’t regret it in two years.”

Treasuries have rallied amid speculation the global economic recovery is faltering, driving yields on two-year notes to a record low of 0.4892 percent today. The Federal Reserve yesterday reversed plans to exit from monetary stimulus and decided to keep its bond holdings level to support an economic recovery it described as weaker than anticipated. The Standard & Poor’s 500 Index retreated 16 percent between April 23 and July 2, the biggest slump during the bull market.

The financial system is riskier that it was than before the 2008 crisis that led the U.S. economy to the worst contraction since the Great Depression, Taleb said.”