To: J.T. who wrote (2377 ) 1/20/2000 12:42:00 PM From: pater tenebrarum Read Replies (3) | Respond to
J.T., will do...note that Robin Mesch, who analyzes trading patterns in bonds based on volume distribution has targeted the 6,97% area as a possible low. imo it is almost impossible to catch the exact low, so i'm a buyer of bonds right here. if they go lower, just buy more...the worst case imo would be a capitulation low just above 7% ,the region of multi-year resistance. one has to look at the big picture as well, in the form of where we are in the Kondratyev wave. while opinions on the subject are divided, i do think that we are in the 'false spring' phase, a time when prices (i.e. inflation) are subject to a cyclical acceleration in the context of the bigger, secular deflationary trend. this would argue for the secular bull market in bonds to soon continue...coincident with the beginning of a secular bear market in stocks. contrary to the received wisdom that the 'new economy' based on technological innovation is a guarantee of unending prosperity, the mechanics of the K-wave suggest that it is more of a disruptive factor at first, that will visit a bout of creative destruction on the 'old' economy, while the new economy establishes it's dominant position. as past examples of technological euphoria at previous similar plateau points in the K-wave have shown, investors tend to price decades of performance into a single euphoric moment. the best example for this would be RCA, which lost almost 97% from it's all-time high in 1929, in spite of continuing to grow rapidly as a business in the decades to come (even during the depression, radio production grew by leaps and bounds). what the LT bulls are missing imo, is the fact that all eras of vast technological innovation have one common feature, namely the destruction of what went before. the automobile for instance destroyed the rural economy of the early 20th century by making horses and everything that goes with horses (from feed to buggy-whips) obsolete. arguably the tech innovations of the early 20th century were more profound and important than today's, and yet, the parallels to tech booms of the past are very compelling.the first sign that the destructive process has already begun is the extreme deterioration in the a/d line. what this all means for the long term investor is imo that it is time to begin shifting one's assets from stocks into bonds until the K-wave bottom is reached, which could conceivably still be a decade or more away. contrary to the public's expectations, which are at a record high (according to Gallup, the average investor now expects an average stock market return of 19% annually for the next decade) we are at or near the point where it would be a lot wiser to reduce one's exposure. remember: at bull market peaks, both consumer confidence as well as expectations with regards to future stock market returns are at a peak as well.
