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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (1815)	3/11/2004 3:10:04 PM
From: mishedlo	Read Replies (3) \| Respond to of 116555

Heinz on the post bubble and another comment on gold The latter has me concerned. ======================================================== Date: Thu Mar 11 2004 14:16 trotsky (JD@long bond yield vs. earnings yield) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved these guys fall into a well-worn trap that characterizes deflationary eras. it is assumed that the old relationships between interest rates and various stock market related benchmarks that prevailed during the disinflation boom still hold - iow, 'old habits die hard', since that boom lasted for 20 years. however, this is a completely different ball game...what the sharp fall in yields presages is an equally sharp slowdown in economic activity. the reconciliation of debt still lies ahead, for both corporations and households. the recovery in SnP earnings over the past year is already a thing of the past, and at best a short term, cyclical reprieve that can be explained via the typical post bubble inventory cycle. it is meaningless in the context of the secular trend, which has changed toward falling profits ( as of '97, when US corporate after tax profits reached their all time high ) , slowing economic growth, and eventually deflationary debt default and asset liquidation. trotsky (Dow/XAU) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved this tight correlation remains extremely worrisome - since it might mean that the pm shares success or lack thereof remains dependent on a continuing stock market rally, which in turn becomes ever more doubtful. ========================================================== Mish note: Silver has disconnected from the markets and the $ but gold has not