First, let's rewind to two decades ago,

Alan Greenspan famously warned of what he called "irrational exuberance in the equity market."

Now the former Federal Reserve chairman says investors worried about excess in stocks might

be better off worrying about bonds instead.

Well, I think we have a pending bond market bubble.

A bubble though, make you think of a manic speculation—

people betting that prices will only go up

like the infamous tulip mania in the 17th century.

It happened in Holland, where prices for tulip bulbs skyrocketed and then suffered

a spectacular collapse.

The problem, essentially, prices of tulips got way out of line with their intrinsic value.

Prices of bonds, well they have been climbing for decades.

In recent years, borrowing costs for governments have hit record lows in many countries around the world,

and we can easily point to two basic reasons for that.

One: since the financial crisis, central banks have been buying trillions—literally trillions—

worth of bonds to stimulate the global economy. That's boosted demand for assets

in a massive way.

Driving bond prices up and borrowing costs much, much lower.

The second point is low inflation.

You should probably consider inflation the enemy of bond investors. When consumer prices rise, that eats into the

real income of bond investors, and market participants demand higher interest payments from borrowers

to compensate them.

For years now, inflation has remained stubbornly low. That's a fertile environment for a strong

bond market.

Now Greenspan's basic argument is that we are moving into different environment,

an environment where inflation won't stay at historically low levels for much longer. An environment where investors will demand more compensation and bigger interest payments in return.

If you combine that with central banks beginning to remove stimulus and ending bond-buying programs

then the argument is essentially that it could spell trouble for the bond market.

Right now you'll struggle to find an investor who will tell you that they are seeing bonds as

reminiscent of the tulip mania of centuries ago, but most accept the bond market is very

expensive.

Greenspan thinks it's unsustainable, and when it pops, it will be bad for everyone.