LIQUIDITY NEWS. THE LEGS OF THE RALLY
[Latest Endogenous Liquidity Index: -60.6%; Latest Global Dollar Liquidity measure: +39.6%]

Does the rally have legs? That's the key question, my friends. More than anything else, the rally that started on Friday is about valuation. Forget all the brouhaha about Mr. Obama's appointees. On that score, stocks still look cheap. Having said that, the real legs of the rally are represented by ... credit spreads. Here, things look rather hellish, I must say. The legs of the rally are very weak. At 586 bps, Moody's Baa ten-year spreads trade at all-time highs — again. If, by early next week, spreads have not declined by at least 40bps, I'll be donning my bear costume. [Federal Reserve: Selected Interest Rates]
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