本文发表在 rolia.net 枫下论坛Market went downward spiral in the past few days, not only in the equity markets, but also in the bond markets and money markets.
Financial stocks led the way, banking stocks dropped across the board, whether it is US banks, Canadian Banks or European banks..
The culprit? US Subprime market and the financial instruments developed based on this asset class. US and Canada curve steepend at the front end and the market is still expecting further rate cuts in both US and Canada, which forming the bull steepening, investors panicked and adopted "flight to quality" strategy, which by some observation is a bit too late in the current market. US treasury rallied at the front end for quite some time... traders see less liquidity, wider bid/offer spread.
So, have we hit the rock bottom yet? nope, we are not there yet, ITraxx Crossover index reached over 600, CDX, still seems to be on the upward track...monoline insurance companies are struggling to raise equity and maintain their AAA rating, US home equity first time dropped below 50% of the house value and today's non-farm employment number for the rolling 3 months average is a big, red negative, which according to history, US is already in recession. Therefore, the best strategy right now is to accumulate cash and hold your position, some time in the next 12 months, we will hit the rock bottome and it would be the time to buy aggressively.
How long we will get out of the current credit cycle? well, nobody knows, it has been THE prolonged credit contraction in recent memory. My prediction is that it will take us at least 12 to 18 months to pass the credit trough and hopefully see the light of recovering. A good indicator to follow is YTM curve, if anybody paid attention last year this time, it was an inverted curve, usually signal a recession in 12-18months period and now, we look back, the curve had correctly predi00cted the trend.更多精彩文章及讨论，请光临枫下论坛 rolia.net
Financial stocks led the way, banking stocks dropped across the board, whether it is US banks, Canadian Banks or European banks..
The culprit? US Subprime market and the financial instruments developed based on this asset class. US and Canada curve steepend at the front end and the market is still expecting further rate cuts in both US and Canada, which forming the bull steepening, investors panicked and adopted "flight to quality" strategy, which by some observation is a bit too late in the current market. US treasury rallied at the front end for quite some time... traders see less liquidity, wider bid/offer spread.
So, have we hit the rock bottom yet? nope, we are not there yet, ITraxx Crossover index reached over 600, CDX, still seems to be on the upward track...monoline insurance companies are struggling to raise equity and maintain their AAA rating, US home equity first time dropped below 50% of the house value and today's non-farm employment number for the rolling 3 months average is a big, red negative, which according to history, US is already in recession. Therefore, the best strategy right now is to accumulate cash and hold your position, some time in the next 12 months, we will hit the rock bottome and it would be the time to buy aggressively.
How long we will get out of the current credit cycle? well, nobody knows, it has been THE prolonged credit contraction in recent memory. My prediction is that it will take us at least 12 to 18 months to pass the credit trough and hopefully see the light of recovering. A good indicator to follow is YTM curve, if anybody paid attention last year this time, it was an inverted curve, usually signal a recession in 12-18months period and now, we look back, the curve had correctly predi00cted the trend.更多精彩文章及讨论，请光临枫下论坛 rolia.net