To: UnBelievable who wrote (256015 ) 8/15/2003 8:23:44 AM From: mishedlo Respond to From Brian Williams To me, a more significant investment issue was the one I was writing about just as the power was going down in New York: the pulling of the $1.7 billion Charter bond deal due to market conditions. all that matters in the immediate future is whether or not the mountain of maturing corporate debt can get rolled over. Yesterday, I noted that getting a corporate bond deal done was no longer a slam dunk, and the inability of Charter to get this deal done is a big yellow flag for financial markets. First, I am going to add to my Treasury holdings. I've written that the technicals in Treasuries look lousy, but this is a fundamental buy. 10-year Treasuries are 140 basis points higher than they were two months ago, and I am still underweighted in them, so I want to own more of them in light of this development. If the corporate sector does begin to falter, that will increase the chances of a move toward quality in the bond market, so I want to have less of an underweight. Second, I am going to trim my corporate exposure a little. Fortunately, I am already underweight both investment-grade and high-yield corporates, as I viewed this year's rally as providing less potential return for bearing the risks of corporates, so I don't have to do this in a panicky fashion. If we get that move toward quality in the bond market, that would be a negative for corporates. Finally, I am going to trim my equity weighting some more. I had been fairly optimistic on equities since mid-March when I pointed out the likelihood of a bond to stock move. A few weeks ago, I grew more cautious when I noted some trends in fixed income that worried me, and yesterday afternoon's news is making me even more cautious.
