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Strategies & Market Trends : Canadian Market Direction
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To: Jan Johnstone who wrote (12)6/7/1997 11:03:00 AM
From: andy   of 35
 
So where do you think we are in the business cycle ... I believe the cycle is still there but it just has a low amplitude? Likewise, the unemployment-inflation balance is fundamentally the same so I don't think 'whole new set of assumptions' is correct. In my view, the tighter interaction between economies has not been reflected in the older thinking or economic models. Speed of response to commodity changes is much more obvious now. The time delay ... that element which provides the speculator a moment of rational thought ... is vanishing. Still haven't seen the big run-up in commodity prices ... and now oil starts to fall off which should help just about everyone except oil and gas stocks.

I agree that TSE could explode upwards if rates don't rise. But I think falling oil prices will force the Fed to raise rates. PPI will start to fall or continue its downtrend. In my view this will be a counter move in that dropping oil prices will have an accelerating effect on earnings and consumer spending compared against the reduction in oil drilling and oil industry activity. Money supply (M1) is contracting in the US. There don't seem to be any 'important' (from the point of view of the US media) crisis items coming down the international political world with the exception of North Korea. A real mess given the historical context of the US involvement, proximity to Japan and China at a time when Helms-Burton want to toughen the rules again. Why I say 'important' is that I'm trying to foresee what kind of event will trigger a large destabilizing swing. There's resilience to bad earnings, resistance to political mistakes ...
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