Britannia Radio

The Question That Could Spark a Crash By Jeff Clark Friday, February 11, 2011 At the beginning of 1987, the yield on the 30-year Treasury bond was 7.4%. The S&P 500 started the year at 250, and many of the brightest minds on Wall Street were forecasting a run to 350 by the end of the year. Bonds were  expensive and stocks were relatively cheap. Less than eight months later, bond prices had fallen. The 30-year yield was 9.2%. As investors fled the bond market, they plowed their money into stocks and the S&P 500 rallied to 330 by early August. Cheap stocks became expensive , and expensive bonds became cheap. Investors could buy the 30-year Treasury bond with its "risk-free"  guarantee if held to maturity and receive a 9.2% return. Or they could buy into the stock market with the potential risk of a significant correction, and capture a 7% gain (according to Wall Street's brightest minds). money out of bonds and flocked to the stock market. The S&P is up almost 30% and is approaching the average  year-end price target of about 1,375. We no longer have cheap stocks and expensive bonds. In fact, we have quite the opposite. Investors can now buy the 30-year Treasury and lock in 4.75% "risk-free." Or they can buy into the stock market  with the potential risk of a significant correction, and capture a 4% gain (according to Wall Street's brightest minds). So which is it? Will you take 4.75% risk-free, or 4% with lots of risk? Your answer could cause a crash. Of course, the media will blame it on high-frequency trading, algorithmic computer programs, and those evil derivative products. But it's really not that complicated. Best regards and good trading, Jeff Clark Further Reading: Jeff has been bearish for a few months now, and his sell indicators are flashing. Between the "Mother Indicator,"  the Volatility Index, momentum indicators, and rising interest rates, there's plenty of evidence it's time to move out of stocks. Read up on Jeff's advice for how to prepare for these corrections before it's too late. Thursday, February 10, 2011 The sneaky way America will default on its massive debts "No one in the U.S. government is going to say, 'Tough luck, Treasury bond investors. We're not going to pay you  another dime…'"   Thursday, February 10, 2011 Ten ways criminals target your home for burglary… … And easy ways you can neutralize them.   Thursday, February 10, 2011 This is the only thing holding back a "tidal wave" of foreclosures "The numbers will inevitably go up…"