Or why not to buy this dip in the stock market.

It was a tough week for stocks yet again as rising bond yields caused investors to freak out.

"Freak out" is a technical term for investors becoming very concerned about how quickly US interest rates are rising. We have written about this before: the pace of change can be as important or more than the level of interest rates.

The main issue right now is everything seems to be pushing for higher interest rates.

​The problem was beautifully accentuated by the US jobs report on Friday. The number of newly employed Americans was 336,000, which was nearly 200,000 jobs more than expected. Also important was that both prior months were also sharply revised upwards.

Rumors of the death of the US labor market have been greatly exaggerated apparently:

This might be temporary but a temporarily strong economy is still strong nonetheless.

This new data had a predictable impact on US bonds yields. Here is how the US 10 Year Bond yield reacted when this data came out:

The US 10 year broke above 4.80% reaching levels we have not seen since before the Great Financial Crisis in 2007.

In some ways, this is nothing new. A strong economy equals....higher rates. What was true 12 months ago and this summer is still true today.

The takeaway from rates at these levels, however, is new:

• It isn't just that the rapid rise of bond yields are scaring investors from owning speculative assets like stocks.

• It is equally that unlike in the recent past there are now real alternatives for savers to deploy their hard earned capital.

How so?

Well there are a few options but the most basic might be the best and the easiest.

You can buy a risk free, tax advantaged short-term Treasury Bill with over 5% yields.

In fact, they are nearly 6% and after the jobs report will likely head higher still.

More specifically:

• The 3 month Treasury bill is at 5.65%

• The 6 month Treasury bill is at 5.57%

• The 1 year bill is at 5.49% etc etc.

These are the highest yields in decades and they are slowly changing investor psychology.

It isn't just that you can get very real - above inflation! - yields or that they are as close to risk free as possible but also that they are exempt from state and local taxes.

That is very nice and also makes these instruments stand out from a standard high yield savings account.

This is a pretty attractive situation. Even for regular savers, you can now invest large sums over:

• different time horizons

• with no risk

• and know to the penny how much you will earn

• and finally, avoid paying any local and state taxes.

That is a very juicy proposition because it has been vanishingly rare for much of the last 2+ decades.

We have written about short term Treasuries before and you can read our work here and here but in early editions the yields were lower and also still far beneath inflation.

Both those things have changed and today's high short term interest rates are offering very attractive alternatives compared to more speculative assets.

Furthermore, you can also get access to these short treasury rates via money market funds. You will pay slightly higher expenses and get slightly lower yields but the benefits are that you don't have to use the clunky Treasury Direct website and you can trade in and out with relative ease.

Unsurprisingly, money market balance have ballooned this rate cycle and are now nearly $6 trillion dollars:

So, plenty of savers are already moving capital to these instruments. You can too! Just pay attention to the expense ratio and that they are run by a large and well regulated entity and that you are buying US short term debt to get the tax exemption.

Furthermore, please also remember this chart if and when you start to think the stock market is attractive. You might be right! But for every person who has your conclusion there will be others who think:

There are alternatives for those with an open mind and an interest in minimizing risk.

The key is the risk part because the future is looking very uncertain and uncertain is another word for risky.

At the present time, U.S. stocks offer the lowest expected performance relative to safe investments since early 2007. This is even true if accounting for their recent losses.

Why?

Because stocks are expensive from a valuation standpoint and other investments are both cheap and very safe.

So, please be careful about dip buying here.

This is doubly true for the largest, most over valued tech stocks.

Why?

Because those companies are most vulnerable to this shift towards a new investing regime that we are entering where capital has a positive real interest rate.

In practical terms, if risk free bonds can offer 5%+ returns and bonds with actual risk yield even higher - say the bonds of high quality companies - can do even better this will make it challenging for investors big and small to think: just buy stocks.

This is especially the case for the Big Tech "Super 7" companies that have been, as we have noted 70%+ of the returns of the S&P 500 this year.

If those companies are suddenly less attractive propositions then that might, in turn, make the overall market far less buoyant. So, keep in mind that the only thing more fragile than the assumptions behind "just buy stocks" argument is the mantra "just buy Big Tech."

In uncertain times when you can get 5%+ risk free, tax advantaged at the very least you should have very high conviction that stocks will perform very strongly before you buy any dips.

Stocks are simply not the only game in town anymore.

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