Timba, the charts are new to me also, and they are interesting combinations of effects... there's confusion in the markets right now in my opinion. The simpler relationships of cash flow, covering, bonds, risk and opportunity have been upset by the Asian mess, worries about the Japan and Korean markets, etc. The net result is that specialists and other speculators are less influential at setting up their short term opportunities.
For example, since last August I've posted a 6% bond target, but I only saw the technical probability of this happening... I'd never have imagined it would come about from Asian turmoil, Japan bank insecurity, Korean industrial questions, and Iraqi worries. These "reasons" seem to suggest that if these problems are resolved, there will be a withdrawl of treasury money and rates will climb. Yet if rates stay down, profitability will be sustained and the market could hold in this high trading range 7500-8000.
The reality of the situation is that damage was done... money relationships of borrowing and capitalization of production have changed, so the recovery won't be instantaneous... it can't be. However, those industries which have strong demand will be financed one way or another... even if it means companines like AMAT or KLIC lowering the cost of their products just to get them sold. Other goods being sold into the area will have a tougher problem.
Does this all translate into six months of downturn as the chart suggests... who knows, Europe may be waking up, Japan may bite the bullit and sink a few ships so the fleet can sail.
Last, any chart in isolation can tell half truths. I would like to see some charts that break out the possibilities of a 30 yr Treasury going to 5.25%. The world's embrace of market capitalism has set a new stage of very fluid production cost structures which cannot easily be compared to more isolated markets and economies of the last 100 years. Its unclear to me how and where wealth is being made redistributed besides the obvious multi-nationals, unique technologies... etc.
So what stocks are you looking at and why?
Jim |
