Why I Think There's Going to be a Correction

Before the crash, a lot of foreign central banks bought Treasuries to maintain the exchange ratio and keep exports strong. However, since the crash, many of the foreign central banks have stopped buying Treasuries, and the burden was placed to the Federal Government to keep interest rates low by buying up all the issuances.

QE1 ended. Now QE2 has ended. Foreign central banks have not rekindled their interest in Treasuries, and the Federal Government has stopped footing the bill. So, the private sector has been expected to account for the ~$370 billion supply of Treasuries each quarter.

Well, let's think what happens if they don't?

If the private-sector demand does not match the supply of Treasuries, the yield will go up and the price of the Treasuries will go down until equilibrium.

What happens when yields go up? Interest rates go up, and the cost of borrowing goes up.

What happens when the cost of borrowing goes up? Companies cannot borrow cheaply anymore, people cannot borrow cheaply anymore, and banks don't enjoy the huge spread between the short-term and long-term yields that have been fixed in their favor.

Because of higher interest payments, a smaller piece of the pie is left for equities, and money will flow towards the higher yielding debt.

Hence a correction in the equity markets, and higher yields in the bond markets. So I would suggest you prepare for it. With the end of QE2, it is only a matter of time before the correction arrives.