B4 - Sunday, August 7, 1983 - North Shore News ll business | GEORGE GRANT of Fireguard Inc. holds up the pant leg that was treated with Fire Guard, a clear, water-based chemical, which after application acts as a fire retardant and wood preservative. Behind Grant are two sets of wood shakes, one treated and the other, still burning, not treated. The exhibition which took place at Lonsdale Quay demonstrated the product's ability to stop fires. A budding relationship Stock Markets ABOUT THIS time last year, the stock market made an unexpected and almost violent turn around which led to the creation of the present primary bull market. Although there have been periods of consolidation, the stock market is ‘still minded to go up. By hindsight, what the stock market could see was the relatively imminent beginning of a new business cycle. Bond Markets. At the same time, the bond market turned around and a state of cuphoria developed, especially in the autumn of 1982, when the United States discount rate fell one-half a percentage point on a regular basis about twice a month. The ra- tionale for this was probably & recognition that interest rates were not only high but ridiculously high; and this acknowledgement overrode for a while the offsetting cf- fects of the increasing size of budgetary deficits in both the United States and Canada. At the present time. the fixed income securities market is more governed by the ongoing problem or large budgetary deficits than it is by the present nominal Icvel of imtcrest rates, which. although high by historical Standards, can no longer be described as ridiculously high. Indeed, some mor- tgage rates in both the United States and Canada have moved up by 90 basis points in the last few wecks. but pcople are still buying houses. Changing Relationships. During the = investment period which is now behind us, there tended to be a close relationship between move- ment and action in the bond market and action in the stock market. [In other words, on a day when the bond market improved it was frequently the case that the stock market improved; and vice versa This was pro- bably because it was (then assumed that only when tn- terest rates had fallen to a certain degree would the economy start to recover. Now the situation is dif- ferent. Interest rates have fallen sufficiently so that, for some time now, they have not been an obstacle to renewed growth. What is apparently hap- pening is that investors are increasingly conscious of the strength of the North American economic recovery, showing up not only in terms of economic growth but also in terms of corporate profits. These investors clearly believe that there is more where all that came from and they are undoubtedly right. It would take a good deal to stop or even slow down the present economic recovery in North Amcrica, at least for a while. Market Conclusions. Although it is not possible to be precise as to how far down the road the stock market looks, it ts assumed that the time horizon is about six months. On this basis, the stock market has probably got some time in hand before it begins to sense a period of slower economic growth. Once this Appointment Notice Chuck Traunwelser, (office) NORTH VANCOUVER Manager of AE LePage Real Estate Services Lid is pleased to announce the appointment of Ron Johnston to the sales staff of the North Vancouver Office Ron has previously been associated with the automobile industry for the past five years and brings with him enthusiasm and experience in dealing with the public if you are considering your home or are interested in an up-to-date market evaluation, please give Ron a call - 987-5159 (residence) or 985-9544 occurs, the likelihood is that interest rates will start to drop, let us say by the se- cond quarter of 1984, in tesponse to straightforward demand/ supply pressures. There is also a_° political aspect to all this, in that 1984 is the year of the presidential election in the United States and probably the year of the next general election in Canada. It goes without saying that central banks cannot be par- tisan but that does not mean that they have no regard to all to the politics of things. After all, the central bankers have to live with the politi- cians. All this should serve to give the economic recovery a second lease on life before the current business cycle starts to turn down again. But in the very short run, the prospects for lower in- terest rates are slim if only because the prospects for a major early reduction in budgetary deficits in North America are poor. For some time to come then we may look forward to a robust stock market but a poor bond market. The relation- ship which was valid about twelve months ago between the stock market and the bond market, moving up and down in tandem, seems at an end. This weekly column 6 presented by R. Dave Evans of Dominion Securities Ames in Vancouver. PERSONAL AND BUSINESS LIFE INSURANCE Sam Esaw, Dpim. MKTG. MGT. # 1200-1055 West Hastings St, Vancouver, 8.C. 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