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Richard's Remarks

 

Bond people are generally considered to be more market savvy than stock market people. Back in the 1960s, Barron's Confidence Index (CI) had an extremely wide following. The CI is the ratio of the yield on medium-priced bonds to the yield on the highest-rated bonds.

 

The theory was that movements in the confidence index were followed by movements in the stock market within two to three months. When bond people are confident, they move to the higher but less safe yields on the medium-quality bonds. But when the bond crowd is worried or less confident, they move to the smaller but safer yields of the best-quality bonds.

 

I've noted that the confidence index (CI) has been fluctuating in the 70s for months on end I consider this to be neutral action. But then last week, the CI dropped below 70, its lowest reading in many months.This means that the bond crowd is ... Log in or subscribe to continue reading.


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