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Value Dilution Shows No Sign of Stopping

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Corporate, high-yield spreads indicate recovery is still a long way off.

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Let me first take a moment to thank Todd and those at Minyanville for all their efforts and their dedication to a greater cause than most can imagine. I'm flattered to have been offered the opportunity to be a part of something that will forever change the landscape of financial education and information. I always figured there would be a time when I'd have the opportunity to "pay it forward." However, I must admit that I never imagined it would manifest itself quite this way.

Now, onto the business at hand.

I've been (and continue to be) of the opinion that the best visual depiction of the current and future economic landscape is that of a hockey stick. While I respect the possibility that we may have arrived at the elbow of the blade; the inflection point, the tangent of the slope or whatever you want to call it. I also know that defining where that elbow starts to form can be a tricky business. While I agree that focusing on the second derivative of numbers (rate of change of the rate of change, or better said, we're decreasing at a decreasing rate) is prudent, what one also must focus on is that of consumer psychology.

Corporate -- and, more importantly, consumer -- psychological and physical balance sheets are still in the process of healing. You don't have triple bypass surgery, then get up the next day and go back to work. These things take time, and lots of it.

The Fed and Treasury have essentially provided a tourniquet to a massively hemorrhaging artery. The patient, however, is still in triage with numerous doctors circling around the stretcher, armed with instruments of cauterization in hand. This ultimate healing process won't be a quick one, thus the Fed and Treasury are going to have to be patient in their expectations of individual consumers consuming large ticket goods and services -- financed with leverage -- anytime soon. This will be represented by the horizontal blade of the stick.
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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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