A Few Observations

What That Guy Said . . .

There is a reason PIMCO is the largest bond fund the world - they have some smart folks in charge. And so I must agree with El-Erian, their CEO. His words are not shocking news or original to him. It is, however, always refreshing to hear someone who knows what they are saying to tell it like it is. I almost throw-up daily reading from those managing money about how the market is about to launch or the DOW will hit 13,000 by year end (I have not heard this for a couple of weeks, by the way), so hearing reality is a nice change. El-Erian's comments on how this time is different and how we are now finally addressing structural headwinds are dead on in my opinion.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPcF.fPJgadU&pos=5

Here is a Surprise . . .

LBO junk bonds are falling like a duck covered from oil in the Gulf of Mexico. Seems greed never dies and people wanting to make money are willing to invest in junk even in dangerous times. Sometimes you get what you deserve.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQZkc.kesuig&pos=4

Did I mention . . .

we are back to S&P levels we were at in 1998.

http://www.calculatedriskblog.com/2010/05/market-update_20.html

Yep, a dozen years with no growth. Thank goodness interest rates and inflation were really low during that period, so investors lost a smaller chunk of their money than might have otherwise occurred. I suspect we will be going into the way back machine soon, as in the market will drop to levels last seen many years before 1998. With the S&P breaking some key technical barriers today at close, some folks are saying watch out below. Personally, I am not a big fan of technical barriers, moving averages, head and shoulders and such. Short term they may provide some guidance I prefer to focus on fundamentals and the market has been defying them for some time. Now this defiance was built on fiscal stimulus and I fully expect Obama and team to come out with some new stimulus package to arrest the current drop, so again we will kick this can down the road, but we will in time catch up to that can and be unable to kick it. Just ask Greece.

And the beat goes on . . .

I noted yesterday the dismal real estate picture, in terms of foreclosures, delinquencies, applications, CRE and the like. Not at all pretty. And unemployment showed a turn for the worse today. No surprise then that a lot of local and regional banks are getting more into distressful situations. A lot of them had heavy CRE exposure and that area is in dire straights at the moment, so no mistake that the FDIC list of Problem Banks has grown to the highest level since 1993 and we have had 69 bank failures this year in less than five months. By comparison, before the recent turmoil we had a couple of years with no failures.

http://www.calculatedriskblog.com/2010/05/fdic-q1-banking-profile-775-problem.html


Tomorrow should be interesting.

Disclosures: None.