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Strategies & Market Trends : The Rational Analyst
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To: HeyRainier who wrote (1560)4/19/1999 12:22:00 AM
From: TonyAylward  Read Replies (1) of 1720
 
Hi there.....

Ha ha - good one about Bill Gates jumping out the plane.

A serious question for you - what exactly is a cyclical stock and how does it behave - of course a cyclical stock is an interest rate sensitive one - like say heavy equip. maker CAT (..erpillar) .
But how do they behave - cyclically i guess - in response to interest rate cycles. When interest rates go down cyclicals NPVs go up and so do their prices - hold on - I dont think that is exactly what happens - i have observed in the past that the market gets ahead of itself - one time (UK - 1990) the market bought cyclicals in anticipation of a cut in interest rates when rates were moderately high (a case of buy the rumor sell the fact) thus when rates were eventually eased - cyclicals got sold off in a big way at the same time that interest rates were falling.

Now US market is buying cyclicals again. Why? Is this because interest rates are about to ease - the threat of inflation has receded or something? What are interest rates doing? Well - 6 month $ Euro-rates are pretty flat around 5% and the yield curve suggests they may actually go up in the future.

Any ideas on any of this? (what also are consumer cyclicals versus consumer - non-cyclicals)
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