SO, bullish sentiment among newsletter writers is back at it's early january high of 60,9%. the last time we had such consistently high readings was in 1987, incidentally a year where a bear market in bonds coincided with a bull market in stocks, same as now. also the trade deficit exploded in 87, which it is doing once again. let me see...what else happened in 1987?
btw, at the market's peak in august 87, the S&P 500 p/e ratio was *lower* than at last october's lows. all this doesn't mean that we have necessarily seen the highs for this year already; one more run to new highs is actually what i expect to happen before the party ends. but it is a strong warning; the road ahead is treacherous, and sometime this year i fear that we'll see a very scary breakdown in prices, possibly worse than last years correction. i continue to be amazed at the state of denial exhibited by many people with regards to the bond market. when yields go to nearly 6% from less than 4,7% in less than seven months, it constitutes a bear market, yet no-one calls it one. all i ever hear from the people interviewed on cnbc is what a great buy bonds supposedly are at whatever level they're at, all the way down. there is a long term supportive trend-line on the bond futures contract that hasn't been broken yet (although we're awfully close), so the bond may well reverse and thereby start to paint a different picture overall. but before there is clear evidence of that i'd be very cautious.
regards,
hb |
