We are witnessing a historical gigantic turning point

It is amazing to watch that the world is turning upside down but silently without general people even knowing it! I bet the majority of you probably don't know that the yield for the 10 year Treasury is almost reaching 3%. This is gigantic jump for the long-term government bond, which will have huge and long lasting impact on almost all aspects of our life. We are truly witnessing a mammoth turning point in history. Please remember and mark the days of now!

The long-term government bond had experienced a 30 year uninterrupted bull run, which has just finished. See the chart below. Please note, the bond price is directly inverse to the yield (or interest rate), i.e. higher bond price means lower yield rate and vice verse. As shown in the chart below, since early 1980s, the Treasury yield had come down nonstop till recently, representing the bond price had relentless moved higher and higher for a total of 30 years without a pause. But now it has stopped and ended. Two months ago, I started to notice the fast appreciation of the long-term interest rate and was wondering if the bond market was telling us something big. Yes, now I'm pretty sure what the bond market is telling us: it is tired of moving in one direction and wants to turn around to move down! In other words, the long-term interest rate will start to move up substantially and dramatically in the following years, probably also in terms of decades. You know what it means to you and me? Almost everything! Yes, directly or indirectly our life is controlled by the interest rate: the costs for goods and services will be higher and much higher but the immediate impact will be the mortgage rate that will be proportionally moving high. A 3% Treasury yield will mean a 5% rate for the 30 year mortgage loan. This kind of fast increase of mortgage rate won't bode well with the recovering of the housing market. It will also negatively impact on the overall economy in a big way. We are truly entering into the era of a huge bearish run for the Treasury. In the short term it could be very volatile. If indeed the 10 year Treasury moves up to 3%, Bernanke will be scared to death and likely the Fed will do something to calm down the market. But in the long run, it does not matter anymore. After all, it is a $10 trillion market, for which no one can really manipulate if it wants to move its own direction. We have already seen the early sign that the biggest buyers of the US Treasury such as China and Japan are downsizing their holding or cutting down their buying. I think this trend will only accelerate as the US debt burden becomes more and more severe. So we are talking about a decades long bearish megatrend for the US Treasury. Please note, this is a uncharted water that not many people understand it. If a bond investor started his/her career 30 years ago, he/she would only know a bullish bond market and would have no idea how the bearish bond market looks like. Very interesting!

Be aware and be prepared and better to start hedge yourself against it. You can directly short the government long-term bond (TLT) or buy the inverse bond ETF such as TBF or inverse stock funds (RXURX). In addition, it becomes even more critical to buy gold and silver, which will benefit hugely from the rising interests (meaning inflation or hyperinflation).