The CDX index tracking CDS's on junk bonds has reached 375 bp...
CDX NA HY...and the one tracking investment grades to 47 bp.
CDX NA IGIn the greater scheme of things this is still a light shower, a pitter-patter of summertime raindrops on a tin roof. But it feels as if the barometer is dropping, too, so this may well be just the beginning of a major storm. Best to cover and ask questions later. Because if the raindrops turn into golf-ball sized hail, as often happens in the summer, those caught in the open will hate the title song forever...
P.S. I have rarely, if ever, commented on the performance of individual companies. Today will be an exception, given the news from Sears. I won't go into the whole story, just remember that it was taken over by K-Mart and chose to keep the historic Sears name. K-mart had just prior gone bust under allegations of management's misleading shareholders and gutting the company through loans, large bonuses, etc. It emerged from Chapter XI in 2003 and, through the magic of leverage took over Sears a year later. The stock went from $20 to $200 (give or take..) and everyone in the business turned green with envy. Ain't debt grand?
Until retail sales start notching down and the bank/bondholder/CDO-CDS holder demand their pound of flesh, regardless.
Look up the SHLD price chart and ponder if Fama's monkey is a good way to pick stocks...
P.S. I have rarely, if ever, commented on the performance of individual companies. Today will be an exception, given the news from Sears. I won't go into the whole story, just remember that it was taken over by K-Mart and chose to keep the historic Sears name. K-mart had just prior gone bust under allegations of management's misleading shareholders and gutting the company through loans, large bonuses, etc. It emerged from Chapter XI in 2003 and, through the magic of leverage took over Sears a year later. The stock went from $20 to $200 (give or take..) and everyone in the business turned green with envy. Ain't debt grand?
Until retail sales start notching down and the bank/bondholder/CDO-CDS holder demand their pound of flesh, regardless.
Look up the SHLD price chart and ponder if Fama's monkey is a good way to pick stocks...
As I said days ago, the Ratings Agencies changed their standards in 2005 and again in Feb. of this year to "do the deal". Their greed over ran their ethics to put it nicely, and if I don't put it nicely, they face lawsuits and possible charges.
ReplyDeleteStick a fork in the hog already because it's more than done. This small snowball has just started downhill and will wipe out whatever lies in it's path.