I'm only guessing, Tip, and haven't done all my
homework yet. Much of the inductive reasoning hinges
on the market's perception of a Japanese recovery and
continued monetary stimulus because it is the path
of least pain for G7 and the ECB. But the emerging logical
train appears to me as follows.
Japan is finally achieving a bottom and will let
the yen fall. G7 will continue to add money to
respective systems, especially UK and shortly ECB.
As world economic activity picks up so will
commodities. Commodity markets will anticipate
this so oil, metals, CRB components gradually rise now.
Commodity sensitive stocks, such as paper, oil, metals,
should respond positively with higher sales due to
increased orders and prices.
The "trick" is to not spook equities with rapidly
rising rates. The US curve should steepen as safety bid
is removed from bonds but short term liquidity still flows.
Eventually some inflation will return but the market may
have already done some tightening for the Fed. The Fed
can raise rates and say its just following...sort of a
sticky-float discount rate policy. And the Fed will probably take
its time raising rates.
BTW note that Buffet added to his real estate exposure
through MGI recently and bought into GCI, a specialty
chemical company. Real estate and chemicals should also
rise under the above scenario.
At some point, the dollar will begin to reverse due to
its own weight, growth in Europe and Japan and the growing
perception that the Democrats may end up controlling Congress
and the White House in 2000. This may help AG get his soft landing.
On the other hand, this stream-of-consciousness strand is all
wrong, Luc is right and the end of civilization as we know it
is tomorrow.<g> Or maybe next week but soon.<g> Or was it this
summer?<g>
It appears to me that the bulls' dreams are still alive since
the Dell news didn't crack this market. And bonds are easier
to short than stocks.
All rights to changing my opinion and positions at any time are reserved.<g><ng> |
