Contrarian signal, definitely.
When they were pushing telecom and internet startups into early IPOs, years before profitability or proven business plans, it was time to sell stocks. Now that they are pushing bonds, it probably means interest rates have bottomed. It probably also means there is a huge pile of bad debt they want to offload. Move that spoiling inventory before it starts stinking too badly.
The ads:
In a radio spot, Mr. Martin says he has always stuck with stocks because bonds are "boring." But after the rough period in the market, he consulted his Merrill Lynch adviser, who recommended diversifying into fixed-income securities. "I was like, fixed-income securities, great. Just so I don't have to buy any bonds," Mr. Martin says with enthusiasm. "That's when he told me that bonds and fixed-income securities are pretty much the same thing." The moral of the story: Don't turn your back on bonds. "If you're embarrassed, just call them fixed-income securities. It's way more impressive."
The reality (same day's WSJ):
The telecom industry will soon begin contributing to U.S. commercial banks' heap of losses from soured loans. The ongoing implosion of the telecom sector comes at a time when the weakening economy has thrust the issue of loan quality forward as large corporations, followed by mid-sized businesses and consumers, no longer have the same wherewithal to diligently pay down their debts. "We are getting to the point where telecom assets will start to have an impact," said analyst Judah Kraushaar of Merrill Lynch & Co., who expects nonperforming loans to rise in the "mid-teens" in the second quarter from the preceding first quarter. |
