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Politics : Idea Of The Day
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To: IQBAL LATIF who wrote (16161)1/7/1998 2:41:00 PM
From: J.T.  Read Replies (1) of 50167
 
IKe, I think you are dead on the money with your bond yield call backing up to 5.90% to 6.10% area. As you are well aware, bond/stock relationship at these levels is less a positive correlation than it was in the market in July 97'. Typically, lower bond yields translates into a friendly equity market behavioral relationship. Today, debate is going on that this is now not so. Why? Because interest rates going down (i.e bond prices up) has an inverse (negative) relationship WHEN MARKETS ENTER INTO DEFLATIONARY PERIODS OF TIME. This is the 64K question. Is it "asset inflation" that Mr. G was referring to in his speech or "price or commodity deflation"? Or is it simply show me the earnings (and if they don't come in) or show me the door? A little more meat to chew on... JT
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