Zeev,
"I still hold to my position that long term (5 to 7 years) we will be stuck in a broad trading range between 5000 to 10,000 on the Dow. Earnings are going to "catch up" with the lofty prices, and actually, stocks may be quite cheap at some points."
Wow. One heck of a trading range! So I take it, if you see the upside of the range as being 10,000(Dow), when the Dow is at 9,275 today, then would you classify yourself in the, "It's a bubble," camp right? A 50% hit to the dow sounds like a bubble bursting to me.
Earnings sure would catch up if the market takes a 50% hit to the 5,000 level (and earnings stay, as is). Is that what you mean by "Earnings are going to catch up?" Or do you mean that earnings are going to start increasing faster than market valuations do?
"Currently, my concern is that the long bond has breached a downtrend line in place for a number of years, if this breach is not corrected fast, I'll have to revise the premise of lower interest rates in the future with short term negative impacts on the market."
As you know, this coming week will determine a lot about what is going to happen to rates. Fed will release data pertaining to import prices (big excuse/reason inflation is so low), trade gap figures, and industrial production, among other important indicators. How the bond market (and Fed) interprets all of next weeks data is going to be key to rates. For the last six trading days, rates have been of major concern.
But we've seen so many times in the past, "rate hike," worries only to see them fall by the wayside. I'm hoping this is just another short-term spike up (especially since I just took a position in the long bond). I hope my feelings aren't a contrarian indicator<G>.
I don't believe I have seen you concerned before about rates before. The turnips must be putting a lot of importance on them now because of the lofty valuations in the stock market. FWIW, I saw Bill Gross (one of Wall Street's brightest bond guys) say that this week is a good time to start buying treasuries. So that tells you where he believe rates are heading.
Thanks,
MikeM(From Florida) |
