The Chart of the Century

Martin here with two critical questions:

First, what is the single most important market in the world?

I can assure you it’s not the New York Stock Exchange. Nor is it the global currency market. It’s the market for interest rates, which is ten times larger than all the U.S. stock exchanges combined.

Second, what is one of the most reliable warning signs of a major, sweeping shift in that market?

Answer: It’s what you see right here in this chart of the century, courtesy of Mike Larson and his research team …

Click for larger version

This is the real rate of interest on 10-year Treasury bonds. In other words, it’s the yield you can earn AFTER deducting what you’d lose to inflation.

For example, if the 10-year Treasury note yielded 6% and the inflation rate were 4%, your real yield would be 2%.

And that’s what’s plotted on this chart — each week for the past 50-plus years.

Here’s the key:

In the past half century, there has been only one
unique period of time when market conditions 
resembled today’s — the late 1970s.

Like today, that’s a time when the Fed had been aggressively pumping money into the economy.

Like today, that’s when the Fed had persistently pushed interest rates down far below their normal level — even below the inflation rate.

Like today, that’s when investors made less than nothing on their money — after subtracting inflation, interest rates fell deep into negative territory. (See the red areas in the bottom left of chart.)

And like what Mike now sees ahead, that period was the prelude to the greatest interest-rate explosion of our lifetime!

In the late 1970s, when did we see the critical tipping point that marked the beginning of the surge? It was after three things happened:

First, we witnessed two periods of real interest rates below zero (same as recent years) …

Second, we experienced an initial collapse in bond markets that began to drive yields higher (same as now) …

Third, we saw a cross-over into the black, as interest rates rose above the inflation rate (same as just happened earlier this year).

And THAT’s when interest rates went through the roof, carrying the U.S. Treasury-bond yield to 13% and the Treasury-bill rate to 17%.

This is why Mike Larson has been so vocal about the coming interest-rate surge. And this is also why you should pay very close attention to everything he says in the days ahead.

Good luck and God bless!

Martin