Interesting to read on Barron's Alan Ableson relating a bear market to Glenn's space trip. His main argument:
For Jim, who tracks the markets from his perch at Bianco Research, holds that the credit markets remain in deep trouble and that the shrinking of spreads is nothing more than the bond equivalent of a bear market rally. And, he warns, in the words of the old Wall Street adage, "the first bounce in a bear market is the best bounce."
The underlying causes of the credit crunch are alive and wreaking their mischief. That would be reason enough for any sane investor to tread cautiously. But what vastly compounds the problem, Jim serves, is that a major player in the credit markets -- the leveraged fund -- is gone. No one has taken that player's place, and no one is likely to.
Without a significant new buyer, the fixed-income markets, Jim contends, will have to be "repriced" to make up for the exiting of the leveraged funds. In other words, he foresees another hit to bonds of the lesser sort (which, of course, constitute the bulk of bonds) and a resumed widening of spreads. And if the credit market is as troubled as he insists it is, he thinks the big rally in stocks is a goner as well. |
