Market bears unacceptable risk, bond market crash possible

The market continues to set records weekly with the Dow now over 15,000 points. Interestingly, the fervor among the investing public we have witnessed the last 40 years when the market hits new highs simply does not exist. To the investing public this new Dow Jones Industrial's record is no big deal. Since the last time the market exceeded 14,000, with inflation, the market would need to be around 17,000 for purchasing power to remain even with its “last record.”

The dollar has lost 10% of its value against international currencies during that time, too. The market would therefore need to be 19,000 points to be even with international values. So this new “record” really is “much ado about nothing.”

The idea that the stock market remains a great opportunity to make money is no longer valid. The DJIA is currently way overpriced with low, low cash yields of 2.3%. Should the market be selling at an average Dow cash yield of 4.2%, instead of being 15,200 points, the Dow would be about 8,300 points.