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Bill,
If you look at the plethora of diagrams around the place showing the
normal(?) economic cycle in relation to the stockmarket, it would appear
that we are at the end of the first of two bull markets. There should be
about a maximum ten per cent decline in the stock market, though the so
called internet stock bubble bursting might impact further on this. The
second bull market should be resource lead and be more impressive than the
current one and the following decline should also be more impressive.
Regards
Rob Fletcher
-----Original Message-----
From: owner-realtraders@xxxxxxxxxxxxxx
[mailto:owner-realtraders@xxxxxxxxxxxxxx]On Behalf Of Bill Bancroft
Sent: Tuesday, 26 January 1999 1:55
To: RealTraders Discussion Group
Subject: Deflation?
Is there a consensus on this forum regarding the US economy and
deflation?
Is our economy now deflationary vs. inflationary?
Furthermore, if the economy is now deflationary, doesn't that change the
relationship between stocks and bonds?
Here's why I ask: Compare the recent action in the daily chart of the
Dow Jones Industrial Average to the daily chart of the yield on the 30
yr treasury bond.
They look the same! They both clearly show a bearish head-and-shoulders
pattern that is close to breaking the neckline!
Isn't this relationship consistent with a deflationary economy rather
than an inflationary one? Anyone familiar with Gibson's paradox? "In a
deflationary enviroment stock prices move inversely to bond prices."
Are we there now?
Bill Bancroft
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