I always look for red flags. My major red flag all the time is when long governments yield 600 basis points over the yield on the S&P 500. At that point, stocks have always been overpriced.
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At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset.
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If you think Treasuries have no risk and high yield bonds have risk, the yield spread is there to compensate for the bearing of that incremental risk. The question is whether it is adequate.
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It is an axiom of investment that securities should be purchased because the buyer believes in their soundness, and not because he needs a certain income.
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Guessing at the future rate of interest is, in my opinion, one of the most puzzling problems in the world.
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