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

To: Sam who wrote (5486)	8/13/1998 1:16:00 PM
From: MikeM54321	Read Replies (1) \| Respond to of 9980

Sam and Thread, I typed out the following passage from Sam's link to Yardeni's June 15th comments. I did so because Yardeni's thinking runs counter to the general thinking we had (many months ago) concerning how falling interest rates may be a driving force behind equity investments. I believe Yardeni is basically saying, "So what if interest rates are very low, they don't mean anything if we are headed into a recession." I don't have an opinion on this myself, but just thought it was interesting enough to post. Plus, I never heard the term, "melt-ups" before and just may turn out to be an apt description of what has been happening in the last few months. Also notice his time frame for the meltdown. Three months from when he wrote it, is late September. There seems to be a looming wall of worry, that is growing, about an October crash. It's going to be interesting to see what actually happens. I wonder when CNBC and CNNfn are going to start running all those specials on October crashes. I'm sure this will add to the anxiety. MikeM(From Florida) _______________________________ Bond Yields Crashing. The Asian Contagion is intensifying and spreading to Russia and Latin America. Nearly one-third of the global economy is either in a depression, or at risk of falling into a recession or worse. Stock markets have crashed in Asia and Russia. They may be about to do so in Latin America. US and European stocks could also succumb to the bearish contagion. Bond yields should continue to "crash" in the major industrial economies. The US 10-year government bond yield fell last week to 5.44%, the lowest reading since August 1968. Today, the CPI inflation rate is 1.5%, the lowest since April 1965, when the bond yield was 4.2%. I still expect to see US 30-year government bonds trading at 5% by year-end, 4% by the end of 1999, and 3% in 2000. Abnormal Times. Normally, this bond scenario would be very bullish for stocks. However, these are not normal times. The global economy may be on the verge of entering a lengthy period of deflation caused by a nasty combination of the depression in Asia and the looming Year 2000 Problem. There could be one more rally in stock prices in the United States and Europe. However, the stock market "melt-ups" during the first half of 1998 are not likely to persist over the remainder of the year. I am especially disturbed that stock prices fell last week, despite a significant drop in bond yields. I had expected that falling bond yields would fuel a summer rally in stocks. Now I'm not so sure. Therefore, I advise you to prepare for possible meltdown conditions starting within the next three-to-six months.