russell exerpts
The damage created by this bear market is becoming world-class. For instance, here are the favorites held by the largest number of accounts at Merrill Lynch and their percentage losses for just the year 2002 so far --
AOL Time a loss of 59.2%
AT & T loss of 46.1%.
ATT Wris. loss of 62.1%
Avaya loss of 70.5%.
Cisco loss of 25.4%.
Citigroup loss of 27.8%.
EMC loss of 42.0%.
Exxon Mob. loss of 2.7%.
Gen. Elect. loss of 4.4%.
Home Dep. loss of 34.8%.
Intel loss of 46.6%.
IBM loss of 43.2%.
John.& John loss of 14.9%.
Lucent loss of 58.1%.
Merck loss of 25.9%
Microsoft loss of 21.1%.
Oracle loss of 35.0%.
Pfizer loss of 22.1%.
Verizon loss of 23.9%
Wal-mart loss of 6.6%.
Not a gain in the bunch, and this is Merrill Lynch, who at least theoretically may have been providing better advice than most (well, maybe).
But that does give you some idea of how the average investor has been faring this year -- and remember, there were two losing years prior to the year 2002.
So this bear market will already go down in history as the second worst bear market since World War II.
......................
Consider the following, which we might say is the phenomenon of junk bonds getting junkier. A record $172 billion worth of US corporate junk bonds or 27% of the total, had ratings of Caa or lower at the end of June, this according to Moody's Investors Service.
A Caa rating is the seventh-lowest junk bond rating and indicates substantial risk of default. All junk bonds are considered to be below investment-grade quality.
In 1998, as a comparison, $30 billion of junk bonds or 8% of the total carried the lowest Moody's ratings. The Caa junk bond universe has grown at a 47% annualized rate since 1998, according to Moody's.
This fits in with my observations of Barron's Confidence Index, which last week dropped to its lowest level of the year at 80.0. The CI is the ratio of top-grade bonds to medium-grade bonds. When the bond crowd becomes worried about the quality of credit, they move from medium-grade bonds to the highest-grade bond, and the CI rises. The reverse occurs when the bond crowd feel more confident about the credit picture, at which time they will move from the top-grade bonds (lower yield) to medium-grade bonds (which provides them with higher yields). |
