KEN FISHER & CREDIT SPREADS
[Latest Global Dollar Liquidity Measure: +15.1% annual growth rate; latest Endogenous Liquidity Index: -28.2%]
Ken Fisher is at it again. As a keen observer of credit spreads myself (I view them as a key "tell" on risky assets), I am very interested in his analysis. On the subject of the rising TED spread, which he labels "cash hoarding", he is adamant: "It's what happened late in the 1998 correction or after the 1987 crash. I can't find it ever having happened early in a bear market. That hoarded cash won't stay in T-Bills for long".
Mr. Fisher's bullish case rests mostly on his analysis of credit spreads. Basically, he says two things: (1) spreads that widened the most "have fallen back" since late july; (2) about a third of the widening came from falling T-Note rates, as opposed to rising corporate bond yields. While my numbers seem to tell a slightly less bullish story, I fully agree with the view that the sort of action that we saw recently is more consistent with a bottom than with a top.
2 comments:
Augustin,
nice blog, keep up your very good work.
re: credit spread
i dont know wat indices you track, but i'm sure mr Fisher is watching a very diff kind of movie on this.
I track the Merrill Lynch High Yield Master for the spread, adding the 10y yield for the yield.
Here's the charts with the S&P behind.
Looks quite painful, and still no sign of positive divergence.
http://img250.imageshack.us/img250/8369/jbs2208po5.png
http://img209.imageshack.us/img209/6663/jby2208nc7.png
Ciao
Gibaryan: tante grazie! I track about 30 credit spread indices daily, and it´s true, as you say, that Fisher´s numbers do look a bit too optimistic. In particular, I am a bit puzzled (and worried) about the Moody´s Baa spread, which is making ... new highs! Arrivederci! Agustin.
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