 The
Comfort Zone
by
Susan Moore
The bond market has retraced some
of its sizeable gains during the last
week (no market goes straight up),
but there are two articles citing
both expert opinions, demographics,
and the trading of the derivatives
market that make the case for continued
movement downward in interest rates
and upward in prices of government
bonds.
The
bond market (which is much bigger
than the stock market) has clearly
been warning of economic contraction
since the end of April, with the movement
downward in rates and movement upward
in price of government bonds (which
happens when bond market investors
are worried about the health of the
economy).
The
economic data and the stock market
has been a bungee of late, alternating
between bad news, producing lots of
talk about "double dips"
and less bad news which is supposedly
signalling the all clear.
It
amazes me at how much the sentiment
is shifting and how rapidly. People
clearly forgot that we had an sideways
to upward movement in the stock market
in the first ten days of August, producing
the highest point in the markets since
late April. Yet August was the worst
August since 2001. That means the
last twenty days of the month were
really bad. Then again, we get the
breather and rebound in the first
two weeks of this month and suddenly
the consensus is that we're no longer
in at risk of a double dip.
Please
read the David Rosenberg piece and
the Albert Edwards pieces to put these
bungee jumps in the data in correct
economic perspective. That allows
us to bring rationality to our expectations
for the market going forward.
Finally,
Gary Kaminsky, a frequent contributor
to CNBC, has a fascinating column
on the parallels to Japan, which is
the subject of our study clubs at
the end of the month. This piece should
help bring solace to those who have
some aggressive positions on the short
side of the stock market.
The
move upwards since we got the "outlier"
ISM number which both the economic
pieces discuss has been on very low
volume, the lowest of the year. This
clearly signals a lack of conviction,
not a preponderance of buyers, but
a dearth of sellers. This and the
low level of the VIX signal that the
next major move in the stock market
is probably down.
The
stock market is undergoing what I
feel is the most major topping formation
that I can find on record. It is like
watching a major weather formation
developing (albeit in slow motion)
that has the possibility of wreaking
major devastation. It is just going
to have to play out in its own time
frame, which should be within the
next month or two (not the next year
or two).
Article
1: Kaminsky's Call: Eerie Parallel
Between Japan in 1990 and America
Today. This week, as everyone talks
about what went wrong at Lehman Brothers;
think instead about what went wrong
with Japan - Click
Here
Article
2: Market Still Deluding Itself.
Source:
investorsinsight.com - Click
Here
Article
3: Yields Fall to Eisenhower
Low in Pimco-BofA View of Fed Easing
- Click
Here
Article
4: Heard on the Street: The Long-Term
Allure of Bonds - WSJ.com* - Click
Here
Susan
hosts "The Comfort Zone"
on 1300
WTLS/106.5 FM Tuesdays at 8:00
am. Her company, Moore Wealth Management,
has office in Alexander City and Montgomery.
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