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Randoms: What Are the Credit Markets Telling Us?


Most credit spreads are at widest level since crisis began.


Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community. See also The Ten Trading Commandments and Looking for Fundamental Validation.

Good morning Minyans as we affix our boots for the hike up the Hump. With yesterday's redheaded mess behind us, we ready anew to chew through the dew. Here's what's top of mind as we scan the universe, boldly searching for clues in the fuse:

  • One of our Ten Themes of 2009 is the manifestation of societal acrimony into social unrest and geopolitical conflict. While the first two boxes have been checked in kind, the final frontier was touched on a few days ago with the North Korean missile launch and again last night, when a U.S. operated container ship was seized by pirates off the the coast of Somalia. Willie Stargell and Dave Parker were reportedly not involved.

  • Pulte Homes (PHM) will acquire Centex (CTX) for $1.3 billion in an all-stock deal that creates the largest U.S. homebuilder. While this will likely have minimal, if any, effect on the broader housing crisis, it will reduce capacity in the industry (at the expense of employees) and gives them $3.4 billion in cash, which will quite hopefully provide financial staying power.

  • The Baltic Dry Bulk Index fell slightly last night, marking its 21st straight decline. Maybe something, maybe nothing but either way, it's impossible to paint it with a bullish brush.

  • WWBD? He would prolly draw your attention to the fact that CMBX Series 5 Spreads (here, here and here) illustrate that everything under AAA has widened to the highest levels seen since the financial crisis began. This, of course, as S&P readies to downgrade CMBS. Way to stay ahead of the curve, guys. How long are these ratings agencies gonna be aloud to stick around?

  • "One thing to keep in mind is that risk capital is not being allocated to credit card and car loans (as per the TALF information after the close yesterday) and is likely waiting for RMBS and CMBS to enter the foray. Given that TALF is non-recourse, people want to swing for the fences. Given that most Investment Grade CMBS are currently yielding 12%-13%, I don't blame them. It is plausible that spreads are blowing new wides b/c people are waiting to purchase CMBS under TALF rather than in the open market." --Minyan B-Rife

  • There are indeed two sides to the current coin, and I encourage you to see both before swallowing exposure (or alotta pizzas, for that matter!).

  • Finally, it's gonna be thinner than Kate Moss on Atkins late today and tomorrow as many traders scoot for the Passover holiday. Less hands on deck means more volatility, so file that in the back of your crowded keppe when shaping your risk file.

  • For my part, I'll be scooting to Baltimore tomorrow to play SuperUncle and vibe some down time with the family. For all ye who are observing, happy and healthy. Let's end this week with some jingle in our jeans and a smile on our puss.


In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.

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No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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