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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Casaubon who wrote (7133)	3/28/2005 2:30:17 AM
From: macavity	Read Replies (2) \| Respond to of 33421

The reasons are always apparent after the fact. I have no ideas what the reason(s) will be - all I do is look at the charts, but anything is possible. My view is this - yields will not rise. I believe that we have a secular deflationary trend in effect. Mr G will try to reflate/inflate but yields will only go so high and then stop. The fact is that with commodities hitting new highs and 'talk about an economic bull' you would expect LT yields to be rising. They are not. There is lot of talk about 'zombie' japanese buyers and this pans in with my view. The US is going through what Japan went through - basically a secular bear recession with a lot of false cyclical bulls. In this environment there is an absence of demand for long-term investments. Hence, my belief that yields will not rise. If there is a flight to safety then this will result in bonds being bought. I have no idea what this could be - terrorists, emerging markets whatever. My argument is this: that cyclical economic bulls (e.g. 2002/3 - present) will continue to fail for a while yet. This is not an environment to sell bonds but rather to pick them up when they get oversold. A large range is more than likely until both 10 and 30Y hit new lows. Looking at stocks - the economy is not going full guns. The Bank sector is below its 55wk EMA, so is tech. If the SPX gets there then we should expect an economic slowdown. This is also 'good for bonds'. Inflation - I remain skeptical while the dollar has picked up friends (gained no new enemies) and mining stocks continue to point south, but who knows. short NQ