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b"January 19, 2018
\\nTraders Still Ignoring Ominous Warning Signs
\\nWe closed the week with more gains on Wall Street as stock traders continue to ignore all the ominous warning signs that have been flashing.\\xa0 The S&P Composite\\xa0 and the NASDAQ both hitting new record highs today.\\xa0 The Dow, not a record high, but positive on the day, closing above 26,000 for the week for the first time ever.
\\nImportant Warning Signs in the Bond Market
\\nBut most importantly, what the market is ignoring is what is happening in the bond market. The bond market fell again; the yield on the 10-year rose. The high yield was 2.46, we closed at 2.639. These are the highest yields that we've had on the 10-year since July of 2014.
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\\nThe stock market has gone up a lot since then, I think about a 45% increase in the S&P 500.\\xa0 Earnings are only up around 6%. So you had a massive increase in the stock market.\\xa0 And a lot of the justification for that valuation, because obviously, valuations have risen sharply, have been based on lower interest rates.\\xa0 \\xa0Well, they're not lower anymore, they're back exactly were they were in July of 2014.
\\nTake a Look at the 10-Year Treasury
\\nBut what's more ominous is not where they are, but where they are headed.\\xa0 That's the thing.\\xa0 These rates are still very low;\\xa0 2.639.\\xa0 We're very close to breaking a key number.\\xa0 I think the bond market looks like it's going a lot lower.\\xa0 To me, this looks like it's it.\\xa0 So I think we're going to break through 3% on the 10-year relatively soon, maybe by next month.\\xa0 I think if we take out 3.75%, it's a quick move up to 4%.\\xa0 Now the last time we had a 4% yield on the 10-year was before the 2008 financial crisis.\\xa0 Basically, that was the yield that broke the camel's back.
\\nInterest Rates vs Treasury Yields
\\nRemember, the financial crisis was triggered by rising interest rates on the debt that had been accumulated in the prior years as a result of Alan Greenspan keeping interest rates at 1% for a year and a half.\\xa0 And then, slowly raising them back up over the course of another year and a half.\\xa0 So as the Fed was moving interest rates up at a measured pace, by the time they got rates back up to 5%, the yield on the 10-year was about 4%. That's about as high as it was able to go.
\\nBubble Precariously Balanced on Interest Rates
\\nNow, you have to figure that today, given that we have so much more debt now than we had in 2008 that the breaking point for the markets is actually far below 4%.\\xa0 If 4% was enough to prick the bubble in '08, a much smaller pin would prick this more enormous bubble.\\xa0 If we could not withstand a 4% 10-year in 2008,\\xa0 what was the high in the stock market in 2008? we were the highs of today. The Dow was around 12,000.\\xa0 So if interest rates get back to where they were, how do you justify it at 25,000?\\n\\nOur Sponsors:\\n* Check out Rosetta Stone and use my code TODAY for a great deal: https://www.rosettastone.com/ \\n\\nPrivacy & Opt-Out: https://redcircle.com/privacy"