Business to cut production. Bad news for commodities. Good news for bonds.


The inventory to sales ratio for wholesalers is too high. The last time the I/S ratio was at these levels the economy was facing a major recession. (See above chart, click on the chart to enlarge it).

Sales are rising too rapidly and inventories are building up. Business needs to bring down the I/S ratio to around 1.15.-1.20. The economy will grow slowly as they try to achieve this feat. 

The slower economy  will keep commodities from rising and inflation may even morph into deflation. Bond yields would decline under this scenario.

Time will tell, of course. And thank you for vising my blog.

More details in The Peter Dag Portfolio on www.peterdag.com

George Dagnino, PhD
The Peter Dag Portfolio
Since 1977
Author, Profiting in Bull and Bear Markets
No. 1 bond timer in the past 12 months. 

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Learn how to manage your portfolio risk and sleep comfortably. Improve the certainty of returns by taking advantage of business cycle trends. Learn to use simple hedging strategies to minimize the volatility of your portfolio and protect it from downside losses.

Keep updated on crucial economic and financial trends including exclusive model portfolios by subscribing to The Peter Dag Portfolio. Just visit www.peterdag.com.

No comments: