Bonds are going on tilt. How to play them, says Mike Khouw

In this article

Warren Buffett once said interest rates are to asset prices what gravity is to matter. If the options market is correct, things could get heavy.

Case in point: the TLT, the iShares 20+ Year Treasury Bond ETF

, which seeks to track the performance of an index of U.S. Treasury bonds. A quick review of the fund's holdings shows that the shortest-dated maturities are just shy of 20 years away, February 2046, and the longest-dated maturities are almost 30 years away, August 2056.

Most investors consider U.S. Treasurys the safest investment in the world, and I've heard people say that because the obligation is repaid in U.S. dollars, which the government can and does create out of thin air, the U.S. cannot (or should not) ever possibly default.