Turkish dollar-denominated bonds and the lira have both fallen in recent days, with investors concerned about its credibility and the potential for U.S. sanctions over a...World Politicsread more
China may have signaled it's going more hard-line on trade, but it could be a good thing, former U.S. negotiator Clete Willems told CNBC.World Economyread more
As China's economic growth declines, some analysts say Beijing may have to spend more on infrastructure, adding to concerns about high debts.China Economyread more
After years of speculation, Neuralink, the brain-machine interface start-up co-founded by Elon Musk, started talking directly to the public on Tuesday.Technologyread more
United's Optum is launching a new partnership with John Muir Health aimed at helping the small northern California hospital operator become more competitive with its larger...Health and Scienceread more
"The charts, as interpreted by Carley Garner, suggest that the upside in the stock market has gotten more limited," Jim Cramer says.Mad Money with Jim Cramerread more
John Paul Stevens, who served on the Supreme Court for nearly 35 years and became its leading liberal, has died.Politicsread more
Aarti Borkar from IBM Security says artificial intelligence bias can exist at three levels: the program, the data and the people who design those AI systems.Cybersecurityread more
A key read on the industry, the Architecture Billings Index, fell into negative territory in June, according to the American Institute for Architects. Inquiries for new...Real Estateread more
The largest U.S. banks are scrutinizing members of the Federal Reserve for any insight into how the central bank will tinker interest rates.Banksread more
Mikaila Ulmer may be just 14 years old, but the Me & the Bees Lemonade founder knows a thing or two about business.Young Successread more
Alan Greenspan, the former Federal Reserve chairman who has a knack for saying memorable things about the markets, is warning of a bond bubble.
"By any measure, real long-term interest rates are much too low and therefore unsustainable," Greenspan told Bloomberg News in an interview. "When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace."
The economy is about to enter a phase of rising inflation, and that sets up the bond market for overheating if it continues. Already Treasury yields have fallen so much there doesn't seem to be room to go lower. Bond yields move inversely to bond prices. Before 2008, the 10-year Treasury bond yielded 4 percent or more. That yield has been persistently below 4 percent since then, currently at 2.3 percent. Eventually, things should revert to normal, and that's what's worrying the former Fed chairman.
Greenspan, who has talked about a bond-market bubble for a couple of years, adds in the interview, "When the bond-market bubble collapses, long-term interest rates will rise."
That could spill over to the stock markets, which keep hitting record highs. Greenspan and others use a method called the Fed Model, which looks at the price of stocks versus bonds. Investors would rightly pick the undervalued asset, and right now, that is stocks.
As Bloomberg puts it: "Using Greenspan's reference of 10-year inflation-adjusted bond yields, currently around 0.47 percent, the gap with the S&P 500's earnings yield at around 4.7 percent, is 21 percent higher than the 20-year average. That justifies records in major equity benchmarks and P/E ratios near the highest since the financial crisis."
The stock market's relentless climb higher and the expectations of rising inflation have given some analysts reason for caution. As CNBC reported on Monday, analysts at Goldman Sachs calculated that annualized returns on the S&P 500 when the market is at its current valuation level are single-digit or negative for the following 10 years.
The S&P 500 has had a banner year thus far, advancing more than 10 percent. On Tuesday, the narrower but widely watched Dow Jones industrial average was edging toward 22,000.
The billionaire value investor Howard Marks recently told his investors they should move to lower-risk investments. "Given my view of the environment, the only reason to be aggressive today is because defensive investing implies low prospective returns. But the question is whether pursuing high expected returns through aggressiveness can be counted on to be rewarded," Marks wrote in a letter to investors. "If the answer is no, as I believe, then this is a time for caution."
Read the full Bloomberg report here.