Overrun by the Bull?
Once again, macro trumps technicals.
My main reason for being long equities was purely a technical/sentiment call. But many of those who were thinking about liquidating their portfolios just 10 days ago turned around and asked me what to buy and how long I thought the rally would last.
I must confess: My honest-to-goodness answer is/was "I have no idea." But the change in sentiment was what quickly caught my attention.
Furthermore, TV commentators and others turned bullish awfully quickly. The real reason: Macro trumps technicals.
I rarely watch financial TV shows, but I tuned in today, and one thing I've noticed today is the extreme bullishness about credit. This is very alarming to me. With credit market debt/GDP about to sail towards 400% -- as of December 31 (and this is before GDP was going to drop and before all of the recent issuance), it was a stunning 370% -- why on earth would anyone buy 30-year subordinated debt of financial companies? I could care less if they yield 8%, to be frank.
So much for deleveraging. In fact, the economy is getting more leveraged.
Hasn't anyone noticed (except Minyan Peter, of course) that each time a "bailout" occurs, we eat further and further into the capital structure? It explains to me why many of the top core bond managers -- sorry, can't name names to protect the innocent -- were down 15% last year and are already down 5-10% this year. They don't understand macro-economics.
This is yet another sign of trouble.
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