Bonds have been in a "bull market" for the past thirty-seven years. Not every quarter, or every month, but bond yields have fallen consistently since Paul Volcker ended the inflation of the 1970s.

And just like any long-term bull market or bubble justifications proliferate. The current 10-year Treasury yield is 2.46%, which equates to a 40.7 price-earnings multiple. If the stock market had a P-E multiple anywhere near that, the nattering nabobs would be screaming from the mountaintops.

But the bond market has become the "knower of all things" – it's never wrong according to the bulls. Low yields are not only justified, they tell us the future.

There are three main bullish arguments.

1) The U.S. faces secular stagnation – permanently low growth and low inflation.

2) Foreign yields are lower than U.S. yields, so market arbitrage will keep U.S. yields from rising.

3) The Fed is raising short-term rates which will cause the yield curve to invert, leading to recession and lower yields over time.

But there are serious issues with all these arguments. First, it's not true the bond market is never wrong. In 1972, the 10-year U.S. Treasury yield averaged 6.2%, but inflation averaged 8.7% between 1972 and 1982. In 1981, the U.S. Treasury yield averaged 13.9%, but inflation averaged just 4.1% between 1981 and 1991. In other words, the bond market underestimated inflation in the 1970s and severely overestimated it in the 1980s.