Thursday, March 20, 2008

Stampede to safety

I could have drawn this chart myself but someone beat me to it (Michael Swanson posted on Safehaven.com). Check out what happened to T-bills.

The low yield Wednesday when this huge rickshaw man doji candle formed was 0.65. Today, it dipped to 0.20 before closing at 0.50. That does not even give a positive after tax return let alone deal with inflation. Yet everyone stampeded like wildebeest with lemming guidance systems into the safest investment that ever existed.

Gee, you think that's why commodities sank? Or emerging markets cratered this week with nary a recovery today?

The credit crisis cannot be close to over.

3 comments:

Anonymous said...

Bear & Bull together are singing the bottom, yet no one seems to be aware of this rare alignment of view.
This must be a ideal contrarian call that the bottom is nowhere near, in credit or stock.

billgo said...

If you want to see DJIA chart action very similar to what we are looking at today, see the DJIA chart from September 1974 to December 1974.

The subsequent period, January 1975 to March 1975, witnessed an explosive rally.

The principal difference is that the bear market of the mid-1970's lasted for about two years, whereas our current slide is of much shorter duration (but then again, no two market periods are exactly alike).

Quick Takes Pro said...

I took a look at the 70s and think that it looks more like late 1973 than early 1975. A big bottom two years earlier with a peak one year earlier and then a double bottom of sorts.
The 4-year cycle lines up better with your view, however.