Federal Debt/Deficit

Crude prices fell 11% in October and almost all other commodities moved lower, easing recent inflation fears. The economic numbers mostly continued to say recession, with the exception of the new GNP number. However, very few believe the accuracy of the number.

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Congressional Deficit Reduction Follies: The ultimate result was a cruel joke, with no meaningful spending restraints and a hodgepodge of new taxes, apparently ripe with special interest favors. Yes, it is business as usual in Washington.

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What’s Up In Japan...Not High on Northwest Airlines...The Good Guys Are Leaving (Office)...Fat Is Where It’s At (Fearless Forecast)...Harley Davidson (Model Portfolio Stock) Introduces New Fat Boy Bike...Phony Evel Knutson Communique Surfaces!

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I continue to believe that at least a mild recession is in the cards for 1990 and that the deficit will soon start to expand. However, I no longer think this will be a strong negative in terms of bond market psychology, at least not over the next six months or so.

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Concerned About The Deficit And Fiscal Irresponsibility But Still Bullish On Stocks...Emotion Can Be The Investor’s Worst Enemy...Our Permanent Congress?...What Ever Happened To The Gramm-Rudman Targets For The Deficit...New Zealand Update

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Our Budget Deficit Fears Have Increased…Update on New Zealand Stock Market...Another Aussie Bond Opportunity?

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As indicated in our November 29th Interim Memo, our Early Warning Index, which is designed to detect intermediate stock market bottoms, turned positive as of the November 28th calculation. I expect a significant rally in December.

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For the month, the net loss for long T-bonds amounted to a half a point or less. All things considered, I thought it was an impressive performance, even though it took place in the dog days of August.

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Special Situation Stock Research: An Update…Budget Deficits Feature Provokes Some Reader Response…National Economic Commission

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Have we entered an age of interest rate discontinuity, where past interest rate history has no meaning? Are the current high rates merely a long-lasting hangover from the high inflation of the late 1970’s and early 1980’s? Is it a matter of there being too much of a demand for dollars and not enough supply? NO!

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U.S. Politics and Fiscal Responsibility…The Japanese Stock Market…Aussie Bond Update

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A Swede jumps ship at the Leuthold Port, a month of much research recapped, hypocrites on the Hill and Airline miseries.

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The bond market held Its own for the first few weeks of July, but prices took a sharp dive on July 21 and drifted lower for the remainder of the month.

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A Giant Step Backward: Hoggish House’s Pork Barrel Propensity for Speedy Spending… Gold stocks are exploding, but gold itself is only edging higher. What is going on?

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In this business, it is often best to conveniently forget what was said in the past. But unfortunately, when the opinions are written down and published, this does not always work. At any rate, this publication has a sometimes embarrassing commitment to full disclosure. So again, we will include our old (1986) crystal ball gazing right along with this year’s predictions.

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Having been a super bull on the bond market since 1981, this publication has turned more cautious. A number of readers have asked for details and elaboration. Today we still view the bond market trend as up, but think a sharp decline might occur sometime in 1987, with T-bond yields rising by as much as 300 basis points.

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Even considering these deficit related problems, we have to remain cyclically bullish on T-bonds for the next few months. The bond market just has too much going for it. Most of our inflation work remains cool, but this month we present two momentum measures for the PPI and CPI that may appear ominous to some.

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Fiscal Responsibility Update...Who were the bad guys this year? How to make a killing in the Oil Patch and an update on Australian bond.

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Bonds held their own in July but did not make new highs. However, it is only a matter of time. We don’t expect much in August but look for a move below 7% for T-bonds by year end.

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Long T-bonds have broken into single digit territory but not by much. However, all in all, bond market action was amazingly good in November, all things considered. Hold existing bond positions. Action on the deficit could bring a blow off move.

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