July 27 marked a major shift in one of the largest and most watched markets in the world. Let me explain…

A few weeks ago, I told readers we were near a tipping point.

I was speaking about the June 30 end of the second round of the Federal Reserve’s quantitative easing program (QE2).

As I told you back then, the program amounted to the Federal Reserve borrowing money to buy Treasury bonds. The government was essentially selling Treasury bonds to itself. The result was more liquidity, lower interest rates and higher prices on government debt.

By some estimates, the Federal Reserve was buying 70% of all government bonds. The program even made the Fed the largest single holder of Treasuries, just ahead of China.

Of course, with all that artificial demand ending and interest rates near record lows, you can see why I thought it obvious interest rates would rise when QE2 ended.

But that wasn’t the only sign pointing to higher yields. As I told investors a few weeks ago…

• Government spending is out of control. According to the U.S. Debt Clock, we owe $14.3 trillion. That’s nearly $130,000 per taxpayer. Yet we are considered one of the safest borrowers in the world and can borrow at rates lower than just about anyone else? It doesn’t make much sense.
   
• Standard & Poor’s slashed its outlook on our “AAA” debt rating from “stable” to “negative.” The ratings agency says there’s at least a 33% chance it will lower its rating on U.S. debt within the next two years.
  
  Without a doubt, this is a signal to the market that U.S. Treasuries are riskier — and the government should have to pay higher yields to compensate (Note: Since I first wrote about this, Standard & Poor’s has upped the chance of a cut to 50%.)
   
• Ten-year bonds are yielding less than 3%. When you factor in the cost of inflation, which was measured at 3.6% for all items based on the May 2011 Consumer Price Index (CPI), those paltry yields leave investors with a negative real rate of return each year.

How long will investors put their money in an investment that loses purchasing power?

So to help investors not only protect themselves — but actually profit — from the end of the Fed’s program and the likelihood of higher interest rates, I told readers I was buying 150 shares of the iPath U.S. Treasury Long Bond Bear ETN (NYSE: DLBS) as the first addition to the portfolio of StreetAuthority’s newest advisory — Top 10 Stocks.

This security rises when Treasury yields rise. So far, Treasury yields have risen from their lows since I first wrote about DLBS, but I think there’s much more to come.

As I said, there’s been a major shift you should know about…

Yesterday, the market experienced a nasty sell-off. The S&P 500 closed down more than 2%.

What we typically see is a rush into Treasury bonds every time the market falls, because they are considered a safe haven.

But on Wednesday, July 27, this didn’t happen. You can see to the right that yields actually rose (meaning Treasuries fell)… even though the broader market was sinking.

The message is clear — investors don’t see Treasuries as the same safe haven they’ve been considered in the past few decades.

So what can you do?

Action to Take –> At this point, I still think shares of DLBS are attractive. I continue to hold them in my $100,000 real-money Top 10 Stocks portfolio.

All signs are pointing to higher Treasury yields, which will mean higher prices for the shares. And because yields are so low right now, the downside for DLBS looks minimal.

P.S. — There’s another way I’m protecting myself from the shocks the market is seeing. I’m buying shares of “Forever” stocks — the handful of companies that enjoy huge (and lasting) advantages over the competition… companies that pay their investors each and every year by dishing out fat dividends… and companies buying back massive amounts of their own stock.

I think the handful of “Forever” stocks I’ve found is the smartest way to invest in this market. One of these ideas even turned every $20 invested in 1972 into $30,000 today. You can get more details in a presentation I recently put together –“The 10 Best Stocks to Hold Forever.” Visit this link to watch.