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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (6751)	9/19/2002 11:42:07 AM
From: pogbull	Read Replies (2) \| Respond to of 89467

Latest thoughts from Steve Saville about what we need to see for a LONG TERM bottom. Posted by George Cole on IHUB investorshub.com Stocks and Bonds Over the past few years bonds have benefited whenever the stock market has taken a tumble. However, history tells us that major stock market bottoms occur at the same time as, or just after, interest rates reach an important peak. In other words, if history is any guide then stocks have no chance of making a long-term bottom until after bonds have bottomed. As long as the bond market continues to be seen as a safe-haven in times of stock market troubles, it will not be possible for stocks to reach a long-term bottom. As to why important bottoms in the stock market invariably occur when interest rates are near a peak, rather than near a trough, we have a couple of theories. One is that major bottoms in the stock market are only possible when investment demand (money) shifts away from all financial assets (stocks and bonds). As long as money is rotating between different types of financial assets anything more than an intermediate-term bottom in the stock market is not possible. Another theory is that new bull markets in stocks, as opposed to bear market rallies, are fueled, in part, by prolonged periods of falling interest rates (falling interest rates allow P/E ratios to expand). In order for interest rates to fall for a prolonged period they must start at a relatively high level, that is, they must be at a level from which they can trend lower for a lengthy period. Furthermore, they must start high enough that they are able to trend lower within a growing economy (within an environment that is conducive to growth in corporate earnings). Over the past few years, stocks and bonds have appeared to be at opposite ends of a seesaw - when one goes up, the other goes down. As long as this seesaw relationship continues we will be confident that a long-term bottom in the stock market is not close at hand.