Montreal, Canada

Jim Rogers, probably the individual investor’s best friend and a deep contrarian value investor, continues to like agriculture and dislikes Treasury bonds. He also favors gold and oil.

Rogers has made his views widely known in the popular press lately, including on Bloomberg news and CNBC.com

The investor extraordinaire, commodity bull and author thinks Treasury bonds rank as one of the worst investments going forward and believes yields must rise amid bulging deficits and a serious lack of resolve in Congress or the White House to meaningfully cut spending ahead of an election year in 2012. Rogers is targeting the long bond as his optimal short.

Treasury bonds have earned great returns since bottoming in 1981 following former Fed Chairman Paul Volcker’s successful attack on surging inflation in the 1970s (see chart above). Bonds have delivered super risk-adjusted returns compared to common stocks over the past thirty years and remain a cornerstone in most individual and institutional portfolios. But that game must change at some point.

Bill Gross, another famous bond bear since last winter and manager of the world’s largest fixed-income portfolio at PIMCO in California, has recently raised the ante against Treasury bonds in his portfolios.

Gross thinks yields will rise over the next year and believes Treasury’s rank as a bad investment – an interesting supposition considering it’s coming from someone who earned a reputation riding the bond bull. I think that’s worth heeding.

In my book, both gurus are right. Who in their right mind would lend 30-year money to the United States at 4.4%? Or even ten-year money at 3.22%?

Well, over the past 18 months or so, Bernanke has been buying more than 75% of all T-bonds issued by Treasury. That nonsense stops on June 30th.

I suppose the bond market, at some point, will enter the gates of a tremendous secular bear market that will force yields much higher. In the absence of Bernanke’s magic wand and QE II (at least for now) and declining purchases by the Chinese, bond yields must rise.

The problem is every time the stock market gets crushed, investors rush into Treasury bonds. But does this make sense? How can a nation sporting monstrous deficits and a low savings rate continue to draw a bid?

I suspect investors will eventually wake up one day and dump Treasury securities en masse. That’s when the real awakening will occur and the notion of America being a ‘safe haven’ is refuted, resulting in some sort of massive market dislocation. It seems inevitable.