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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: bobby beara who wrote (36761)	1/5/2000 6:12:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

Bobby, i have been considering the return to deflation argument and as you know i have always held that the secular trend remains toward deflation and that the current inflation up-tick is of a cyclical nature. it all depends on whether the global economic recovery is for real or only a bump in the road before the next spectacular collapse. the bond looks like it may be closing in on the capitulation selling stage...remember though that inflation and deflation can co-exist. the countries with trade surpluses and strong currencies (all of Asia basically) are much more prone to deflation than countries with current account deficits like the U.S. if the dollar tanks not only against Asian currencies but against the Euro as well, imported inflation will shoot up...and commodity prices will as well. note that the metal related stocks are among the best performers of late. in any case, gold will perform very well in case of outright deflation, contrary to conventional wisdom. that's because of it's special status as money...the only money no CB can print more of. you are probably aware that there are several historical studies showing that gold rises in times of outright deflation... btw, negative sentiment on bonds may not yet be thick enough...the Rydex ratio on bonds is still quite low considering the technical breakout in the TYX. note that it has now negated a big rising wedge formation and broken above a prior resistance level dating back from '97/early '98. there is remarkably little attention paid to the woes of the bond these days, and i for one believe it is not so much trading on inflation expectations but is delivering a damning verdict on recent Fed policy, which is/was too easy. Al is just printing too damned much. btw, agree on the Hang Seng and the Nikkei. both have become hotbeds of speculation lately unsupported by fundamentals - not unlike the NAZ. hb