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Bigger problem as I see it is very near term ... prices of NG and CL
continue to trend higher placing a very real tax on the economy and consumers.
Energy prices have been moving inversely to the US$. If the Fed/Admin/Market
don't raise interest rates to support US$, energy prices will continue to rise
creating a major political issue for the guys running things.
Earl
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----- Original Message -----
<DIV
>From:
<A title=mr.ira@xxxxxxxxxxxxx
href="">mr.ira@xxxxxxxxxxxxx
To: <A title=realtraders@xxxxxxxxxxxxxxx
href="">realtraders@xxxxxxxxxxxxxxx
Sent: Tuesday, January 06, 2004 11:08
AM
Subject: Re: [RT] Fwd: bond market
forecast for 2004
Cycles have a way of expanding and contracting. Your
assumptions could verywell be right. I see some other factors that
might impact the movement inthe bond price. The CRB is moving to new
highs almost every day. I have aprojected high around 296.
Gold has not seen its peak as yet. The fall ofthe dollar means that
everything we import will go up in price. Housingprices are rising
at a rate of 20% per year in our area. Health care andinsurance
prices are rising. Gasoline and natural gas are still nearall-time
highs. The government has a trillion dollar debt to refinance andhas
to come to market for that. that debt is increasing every day and
thatwill provide competition for dollars. All of these factors
foretell ofimpending inflation, no matter what the government
says. Can they holdthe bluff until after the election? A
good question. How does thegovernments stop inflation? Raise
interest rates.Just some thoughts from the other side of the
coin. Ira.----- Original Message -----From: "topos8"
<topos8@xxxxxxx>To: <<A
href="">realtraders@xxxxxxxxxxxxxxx>Sent:
Tuesday, January 06, 2004 9:45 AMSubject: [RT] Fwd: bond market forecast
for 2004--- In <A
href="">gannsghost@xxxxxxxxxxxxxxx,
"topos8" <topos8@x...> wrote:THE U.S
BOND MARKET IN 2004On December 29, 1982, with long term U.S treasury
bonds yieldingclose to 11 % and the bond futures trading near 60 (basis
newcontract) I published a long term bond market forecast. This
wassent to subscribers of my newsletter, The Cyclic Forecast,
whichceased publication in 1983.Not once over the past 20 years
have I been tempted to alter theconclusions reached in that forecast, but
now might be a good time tobring it up to date.The thesis of that
forecast was that a new long term cycle in bondprices and interest rates
had begun at the September 1981 peak inlong term interest rates when the
30 year treasury bond was yielding15.30%. I expected the new cycle to
evolve in a way similar to thecycles that had begun at the two previous
long term peaks in interestrates in 1857 and in 1920.I quote from
the December, 29, 1982 forecast: "If the bond marketfollows the average of
these two historical cycles, then bond pricesshould be in a generally
rising trend for the next 30 years. Thepeak in bond prices and the
low in long term interest rates is notdue until the year 2010...long term
bonds are once again (a) highreturn, long term investment vehicle and will
remain so for ageneration to come."Over the past 20 years I have
often reiterated the conclusions ofthis forecast in conversations with my
consulting clients. In fact, Ihave often asserted that before this bond
bull market ends the yieldon long term treasury bonds will be BELOW the
dividend yield on theDow industrials. As I write this the U.S. treasury
long bond yieldsabout 5.10% while the Dow's dividend yield is about
2.00%.Needless to say I think that there is yet another big upleg in
longterm bond prices ahead of us (and probably another big downleg
instock prices). My current estimate is that the long bond
willprobably yield around 3.50% sometime in 2008 while the
Dowindustrials will then show a dividend yield of around 4.00%. At
thatjuncture a new 20 year bear market in bonds prices will
begin.One way to get a glimpse of likely bond market trends for 2004
is tomake use of the historical averages of price and interest rate
trendsduring the bull market in bonds that began from the 1981
lows.First of all it is probable that the June 2003 top in bond
prices(123 in the futures and a yield of 4.14% in the long bond) was a
topof importance comparable to the tops in 1993 and 1998, the last
twotemporary tops in this ongoing bull market. Here's why.At the
October 1993 top bonds had advanced 37 months from theSeptember 1990
low. The futures had rallied 35 points while the longbond had
dropped from a yield of 9.12% to a yield of 5.77%, areduction of 37%. At
the October 1998 top bonds had advanced 47months from the 1994 low.
Futures had rallied 39 points while thelong bond had dropped from a yield
of 8.18% to a yield of 4.65%, areduction of 44%.In comparison, at
the June 2003 top the bonds had advanced 41 monthsfrom the January 2000
low. The bond futures had rallied 34 pointswhile the long bond yield
had dropped from 6.77% to 4.14%, areduction of 39%. All of these
figures show that the January 2000 -June 2003 upswing was comparable in
these important respects to theupswings that ended in October 1993 and in
October 1998.The 1993 and 1998 tops were followed by declines which
lasted 13 and15 months respectively. The bond futures dropped 26 points
from the1993 top at 122 while the decline from the 1998 top was about
27points from 135 (adjusted for the change in contract
specificationthat occurred in the March 2000 contract). From 5.77% in
October 1993the long bond yield rose to 8.18% in November of 1994, and
increaseof 42%. From 4.65% in October 1998 the long bond yield rose
to 6.77%in January of 2000, an increase of 46%.If the precedents
established by market action following the 1993 and1998 tops is followed
subsequent to the 2003 top I would expect a lowin bond prices and a high
in the long bond yield sometime 13 to 15months after the June 2003 top,
i.e. sometime between July andSeptember 2004. If the bond futures again
drop 26-27 points fromtheir 2003 top at 123 the 2004 low will be in the
96-97 range. If theyield on the long bond increases 42% - 46% from its
4.14% level inJune 2003 it will reach the 5.88% - 6.04% zone at its 2004
peak.The extent of the upwing in bond prices which is likely to begin
fromthe 2004 low is harder to estimate, but I shall probably not go
farwrong if by assuming that it will be similar to the average of
theupswings that ended at the 1993, 1998 and 2003 tops. If it does
theupswing will continue about 42 months, i.e until April of 2008.
Itshould carry the bond futures up about 37 points, i.e to about
the134 level. The long bond yield will probably drop about 40%, i.e
to3.50% or so.Carl--- End forwarded message
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