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daemon@ATHENA.MIT.EDU (Conrad)
Sat Apr 15 08:07:34 2006
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From: "Conrad" <hwtt@cryingmail.com>
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Date: Sat, 15 Apr 2006 18:48:28 +0600
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Forget Goldilocks. Pollyanna's been running up and down Wall Street lat=
ely, annoying bears and bulls alike, and she doesn't seem to be getting =
tired - yet.
Oil is back near $70 a barrel, gold is flirting with $600, a 25-year hi=
gh, and the 10-year Treasury yield is back up near 5 percent, its highes=
t in almost four years - all classic signs that some investors think inf=
lation's about to make a comeback.
The details See more
Special Reportfull coverage
Oil drifts below $69
Summer gas prices on the rise
Cut your costs at the gas pump
Ready for $262 a barrel oil?
Yet stocks are doing just fine, considering, posting modest declines at=
most over the past few sessions.
"The stock market is wobbling, but not tipping," said Douglas Altabef, =
managing director at Matrix Asset Advisors.
In fact, the major gauges remain near multi-year highs and the Russell =
2000 index of small-cap stocks is near its all-time high.
Why is that? It may be that the factors lifting oil, gold and interest =
rates are also lifting stocks, said Stephen Leeb, president of Leeb Capi=
tal Management. "The rise in commodities, interest rates, all of this is=
a reflection of worldwide growth," Leeb said. "That's why the stock mar=
ket is not crashing."
The surge in gold prices - traditionally seen as a hedge against inflat=
ion - could also be a reflection of broader demand for the commodity aro=
und the world, Altabef said.
As long as all of these other markets can keep rising, that should help=
support stocks, Leeb said. "The risk is if one of these markets became =
explosive," he said, that could upset the balance.
So are stock investors just delaying the inevitable, or are there enoug=
h factors in place to keep stocks from sinking?
The sky is falling
Surging oil prices, gold above $600 an ounce and rising rates could add=
up to a nasty environment for stocks, said Paul Mendelsohn, chief inves=
tment strategist at Windham Financial Services.
And the market could be especially vulnerable if oil, gold and interest=
rates surge further, he said, noting that such an environment would be =
somewhat the opposite of what happened in 1982, the start of what the St=
ock Trader's Almanac calls the "super bull cycle" that stretched on and =
off until 2000.
Inflationary pressures similar to now were in play in 1982, Mendelsohn =
noted, but receded gradually the next few years, enabling stocks to rise=
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