Monday, March 21, 2005


John Maudlin Outside the Box

In the latest John Maudlin Outside the Box is a column Of Bonds & Zombies By Anatole Kaletsky. In it Kaleysky notes
Two weeks ago we noted that the biggest factor which was holding down the yields in US and European bond markets was the price-insensitive buying by three investors groups: Asian central banks, Western pensions and insurance funds and, most importantly, Japanese private investors.
In the column he also notes
The Nikkei and the US bond yield have been moving in tandem for most of the last decade. The correlation of daily movements in these two markets has been 90% since 1990 and 92% since 1996. Intriguingly, the correlation between the Nikkei and the US bond market has been much closer than the correlations between US and Japanese bond markets or between bonds and equities within either Japan or the US.
I took a look at the P & F chart of the Nikkei since Feb., 2001, and it appears that the nikkei has completed a large base and a move through 12,000, would signal higher prices for the Nikkei and if the correlation holds, higher treasury bond interest rates for the US. Not good news for interest-rate sensitive corporations and consumers. Below is the P & F chart courtesy of StockCharts:

One more chart: This one shows how the financial stocks are acting. They appear to be anticipating higher interest rates. (Hat tip to Richard Russell's Dow Theory Letters)

Mover Mike

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