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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Chip McVickar who wrote (1502)5/13/1999 10:04:00 AM
From: Henry Volquardsen  Read Replies (4) of 3536
 
Hi Chip,

I always find Martin Armstrong fascinating. I agree with so many of the specifics of what he says but sometimes disagree with the conclusions.

I agree with almost all the specific comments in the article you posted. I also agree that there is a risk of a serious correction in US equity markets. Where I have trouble is with the mathematical precision of cycle forecasts. I do believe markets move in cycles but, just like in Anthropology, observation often changes the observed. Or as I like to say, history repeats itself but never precisely. I don't believe this will play out as neatly as forecasted. This is not a closed system, it is dynamic. Observation and reaction operate at each stage and rewrite the forecast as you go.

For example, Martin makes reference to a weaker dollar starting a market correction. I agree with this and think it will happen. I've been watching the US bond market with great curiosity. Inflation remains very quiet, real rates of return are high and there is little if any chance for near term FED action yet US bond yields have been rising inexorably. Why? I think in part because there has been some recovery in Asia and Europe. As these situations stabilize money thar flowed into the US bond market has started returning to those markets. If this recovery continues it will eventually suck some money out of US equities and the dollar will also start to weaken. But one thing very important to remember is that the weak Asian recoveries we are seeing are being fed in large part by Exports to the US and the strength of the US markets. A weaker dollar will have an almost immediate impact on their competitiveness and severely crimp their recoveries. The question then would be how deep the correction in US markets had been; very deep and severe psychological damage would probably fold out into a harsher long term correction, a shallow correction and the US markets will probably regain some safe haven status as foreign markets slow. My own suspicion is the latter but that is just a gut feeling.

Henry

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