Stock Bond Ratio

Friday, October 05, 2007 | 11:45 AM

I'll be in a dentist's chair by the time you read this, but I didn't want to leave you with nothing to think about while I get my first crown put in.

Fascinating chart, showing the ratio of S&P500 to T-Bond. This implies (at least over the past few years) that there is a finite relationship between the two that oscillates. (I'd love to see much more data on this -- at least another 30 years or so).

Dennis Gartman noted:

"It makes rather clear that once bonds begin to gain upon debt (as they did back in '99... or again in early '04), they tend to continue to do so for a very long while. But once the old trendline is broken, it is usually definitive and we can trade in this new direction for many months, knowing that the new trend has some very real staying power. The trend toward equities outperforming debt continues apace. Trade then accordingly, buying stocks whilst selling debt."

Fascinating relationship:

Stock_bond_ratio

Graphic courtesy of MacroMavens (via Dennis Gartman)

Friday, October 05, 2007 | 11:45 AM | Permalink | Comments (28) | TrackBack (0)
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Comments

Barry,

This blog has so over shot the sub-prime situation it isn't funny. The market has now priced it fully in and as you can see from the Merrill news, NOBODY but you, Gary Schiller, Peter Schiff and Dougie Kass CARE anymore. If I read one more article from Hussmann about how the S&P is 50% overvalued, I'm going to upchuck.

Let's move on to how to make some money on the long-side vs harping on how doomsday is right around the corner and the US markets are going to crash.

I can't tell you how many hedges I have bought over the last 18 months from reading this blog. I take full responsibility for my actions, but if you could be a LITTLE more objective and come from BOTH sides of the coin, it would really give your readers a better feel for what is happening in the market. I think you have COMPLETELY missed the global boom and the impact of the weak dollar on corp. earnings. You have also totally underestimated the stamina of the consumer. Yes, the economy is slowing - we have all known that for a year now. Let's hear about something that will move the markets that isn't / hasn't already been priced in. That is value added info.

Love the blog, but if you get too many like minded individuals all posting the same doom and gloom all the time, it gets old after a while. The lack of a back and forth dialog on the BP is amazing.

Posted by: Jdog33 | Oct 5, 2007 12:05:13 PM

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