One number is, by far, the most important number in finance…
And in the last two months, this number has soared by 60% – its greatest percentage move since 1962.
This is bad news.
When this number changes, every other number in finance changes…[ad#Google Adsense 336×280-IA]When you’re talking about money, the interest rate on the U.S. 10-year Treasury is the most important number on the planet.
Just about everything relating to the financial markets is either based on this number or strongly affected by it.
In the last six weeks or so, the interest rate on the U.S. Treasury bond has soared from 1.7% to 2.6%.
That’s a huge jump in such a short time.
And it’s having ripple effects… For example, mortgage rates have soared from 3.4% in early May to 4.4% today.
Nothing has changed in real estate… It’s just that mortgage rates are based on the 10-year government bond rate. And when it goes up, mortgage rates go up.
It’s also causing Brazilian stocks to crash… The stock market in Brazil has lost 20% of its value – in just the last month. You might think that something went really wrong in Brazil for Brazilian companies to fall that much. But that’s not it…
The U.S. bond yield went up… and that has crushed asset prices across the globe, including Brazilian stocks. Here’s the basic idea…
You might not have realized that what happens in a U.S. government bond affects the world. But it does… more than most people can imagine.
If this interest rate keeps going up, it could spell the end of our good times… It could mean the end of the Bernanke Asset Bubble.
I’ve been writing about the Bernanke Asset Bubble for years. It’s the idea that Federal Reserve Chairman Ben Bernanke’s zero-percent interest-rate policy will drive stock prices and home prices higher than anyone can imagine. My True Wealth subscribers have made some fantastic gains through the Bernanke Asset Bubble so far.
But we have hit a few of our “trailing stops” in recent days. If the interest rate on the 10-year Treasury keeps going up, our Global Bernanke Asset Bubble thesis will struggle.
In the short term at least, I think Treasury yields will come down. ALL the bets now are on higher interest rates for 10-year Treasurys. Usually, when EVERYONE is making the same bet, the opposite happens. The simple reason is there is nobody left to make that same bet to push it higher.
So I think the most important number in finance will start to fall – for a little while – and the boom will kick in again.
If I’m right, we’ll continue to profit from the Bernanke Asset Bubble. If I’m wrong, I’m willing to follow my trailing stops and sell.
I urge you to do the same.