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Decade Without End, Amen, Avers This Market Watcher.
Edited By Robin Goldwyn Blumenthal
With all the selling that went on in the first week of the new year, some might be tempted to regress and party like it's still 1999. The urge to turn back the clock comes as no surprise to one pundit, who says turns of the year and decade have exerted outsized stress on markets in the last century.
In addition, Bob Hoye, editor of Institutional
Advisors, whose audience is pension-fund managers, developed a model about 20 years ago that indicates a confluence now of what he considers the key factors that show the end of a speculative bubble may be near. They include a rise in base metals that accompanies the business recovery that goes with the final phase of a financial boom, an "irresistible buying mania into the window," with signs of speculation, and low or negligible inflation.
"These tops in the past have been fully integrated with metals prices, credit spreads and the yield curve,"
Hoye says.
Though the big speculative bubbles of the past have burst in spring or summer, in November he issued a report on turns of the year and decade that shows an unusual number of market tops occurring within the turn of the year since 1892, as well as a like occurrence of end-of-the-decade
reversals
Indeed, though he gives a wide berth to turn of the year (it could extend from November to February), he notes that the tulip mania of 1637 experienced a severe speculative reversal in January, as did the Tokyo market of late 1989 and the attempt to corner the gold and silver markets in late 1979 and January '80. "This action in the Nasdaq is the equivalent of gold in '79,"
Hoye asserts.
Interestingly, Hoye notes that the turn-of-the-year tops haven't been related to taxation or to the U.S. election. And, he suggests, there is no particular catalyst needed to burst the bubble. "It just blows itself out and quits,"
Hoye says. It's not as if Hoye's readers have missed out on the bull market, either. He notes that his colleague,
Tom Peterson, runs a small stock portfolio that is up 150% on the year.
So, when might the end be near? Hoye remains a bit coy, but says the safest thing to say is that "we are looking for a top and we have the tools to identify [it] once it's in."
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