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The new year started with a brief sinking spell for the bond market.

Each year, along about February, this publication makes a series of "Fearless Forecasts". Readers should not confuse these forecasts with the more traditional economic and market predictions that appeared in last month's issue. Still, in the past, the "Fearless Forecasts" have, at times, been closer to the mark than the conventional predictions.

Another New Year has arrived.

The Leuthold Group's special research study on this subject was sent to clients last month.

  In this business, it is often best to conveniently forget what was said in the past.

After an early December sinking spell, the bond market kind of floated higher for the rest of the month, closing out 1987 just slightly below its fourth quarter highs.

The Outlook - A Summary of Current Views…Faulty Recollection of 1929…A Crash Still Waiting To Happen…December Bottom Fishing Time…Aussie Bonds…The Leuthold Group Eats Some Garlic

The cyclical bear market appears to be bottoming, but that is only an opinion. Although improved, the Major Trend Index remains negative. Thus, we remain very cautious. We respect the numbers more than our opinion.

For a change, the Value Line Index and the NASDAQ performed better than the S&P 500 and DJIA. Inflation beneficiaries, High Yield groups and Value stocks did relatively well. Big Growth stocks (especially Drugs) performed poorly. Small technology stocks were also beat up again.

Some of our clients are taking a pledge to never again buy secondary stocks, especially OTC issues. We urge you not to take this same pledge. Since mid-1983 secondary stocks have lagged badly, but this is not typical.

Much has been made about the CRB Index making a new high on November 27. We are very skeptical. Comparisons herein will demonstrate the warping in this index. I think we are now getting an inflation false alarm, but at this point the signals are mixed.

This issue our conventional asset allocation model is shifting part of its catastrophe insurance gold holding into platinum. We are becoming increasingly concerned about a gold glut in the next decade, while quantum leaps in platinum production are not in prospect.

The Major Trend Index still negative but improved last week. I doubt that the market has recorded its bear market low, but I do think we are getting close.

For quite some time this publication has been maintaining that “the next cyclical bear market could be very similar to 1962”. At least up to now, the 1987 decline does indeed closely resemble 1962.

A performance run down for our sectors, including experimental sectors, ranked by October performance. Most equity sectors went down significantly more than the S&P 500 during October.

Maybe it's a Minnesota year - the Twins win the World Series and Northwest Airlines leads the pack terms of customer complaints! Also, tracking the impact of Black October around the world.

The stock market is no longer radically overvalued. The current readings on these benchmarks approximate the readings at some past cyclical bear market lows. History tells us that new cyclical bull markets do not always have to come from grossly undervalued levels.

After an ominous five-point sell off in the first part of October, the Treasury market turned on a dime and blasted upward, running up 10 points in four days. But not all bond market sectors participated. It was a flight to quality.

Don Weeden’s two-in-one solution to the debt crisis…Do dividends matter anymore?