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Kenneth Fisher: Surviving Rate Rises

June 04, 2006 | About:

Should you fear rising long-term interest rates? The ten-year Treasury, which started 2006 at a 4.4% yield to maturity, now hovers near 5.1%. As I have been arguing for a while, the bullish case for equities hangs to a large degree on the fact that corporate share purchases--in the form of either cash takeovers or stock buybacks--have the effect of boosting earnings per share of the company buying the shares. And this phenomenon, in turn, depends on the fact that long-term interest rates are low. A chronic upward trend in long rates would do a lot of damage to stock prices.

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