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Wednesday, November 24, 2010

U.S. Bonds vs. Stocks

The ratio of the U.S. Treasury long bond versus the S&P 500 might get a bounce at the trendline here.  If a breakdown appears, stocks might get a boost, furthering Ben's "wealth effect" strategy.  A virtuous circle wherein mom and pop finally pull money out of bonds as interest rates rise and they hustle back in the stock market.  We need to remember that this chart is a ratio and can be used to observe the relative performance of bonds vs. stocks.  They could both crater.

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