The Market's Change of Character
Is stealth risk avoidance starting to take place?
I'll also note the slight rolling over in the BKX, which to me is the second to final straw in this play. Note here how it is rolling over....
The most important to me, the bond geek of the Ville? Corporate spreads, and in particular spreads on financials, like money center banks. I have asked all of my coverage out there to keep me up to date daily and there seems to be a slight (couple of basis points) widening taking place. Very stealthy so far. But if the market begins to really avoid risk as the CRB breaks and Treasuries are bid up, I will seriously run for cover. This is the most important part of the bearish puzzle that is missing and one that I am watching like a hawk. In my experience, the potential pain in spread widening can be humbling and nasty. After all, folks buy bonds for safety right? What could be worse than losing money in a safe investment? Losses should be reserved for stocks? WRONG! I could tell some 'war stories' about corporate bond collapses as spreads blow out, but not after people just ate breakfast. Take it from me, they are not fun....Some day I will tell you about them, but to be sure, my firm is void of corporates and intend to stay that way until the risk/reward ration comes into balance.
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