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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Bosco who wrote (4520)	6/14/1998 1:30:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 9980

Bosco, the next thing one gets (after a "following") is being burned in effigy or crucifixion. Who needs the former and the latter one of my ancestors already took the honors (VBG). Zeev

To: Bosco who wrote (4520)	6/14/1998 1:56:00 PM
From: MikeM54321	Read Replies (1) \| Respond to of 9980

Thread, Just in case there are those that haven't quite followed our recent discussions, this article sums it up quite well. And, I believe, reflects our general opinions surprisingly accurately. Hope it helps. MikeM(From Florida) ****************************************** THE BOND YIELD CONNECTION by Cousin Bob June 12 --There are a couple of ways to interpret the recent strength in the bond market - the 30-year yield fell to 5.65%, its lowest level ever - as it relates to equities. In a very simplistic analysis, the low yields are favorable for equities in that they translate to lower borrowing costs for corporations and reflect our current non-inflationary environment, which also is beneficial for companies. The bond and equity markets, in essence, compete for investment dollars, which means falling yields increase the relative attractiveness of equities. On the flip side, the recent bond strength also reflects the rising dollar and increasing weakness in the Asian economies, both of which translate into declining exports for U.S. companies. The point is that a number of variables, working in different directions, determine bond trading. That, in turn, influences the equity market, both directly and indirectly. It's for these reasons that on any given day, investors, the media and whomever can basically draw any conclusion they want about what the bond market means to equities. It's hardly an exact science. To that end, many of you may wonder why I feel so strongly that low yields will keep the equity market from undergoing a dramatic correction. Mind you, my position is that stocks are overvalued and will trend lower, but not unabated. The key factor here is cash flow. Money continues to pour into the marketplace and it must find a home. Maybe it will go toward bonds, but at what point do falling yields entice investors to dump some of that cash into equities? Given where yields are currently, my guess is probably not much lower. Again, this isn't to say the equity market won't continue to trend lower; it just means we'll have some rallies along the way.