Thursday, January 10, 2008

A wholescale massacre is about to begin

Post the weak job reports on Friday, I am firmly in the US recession camp.

Last year was subprime. This year it will be CDS. Corporate bankruptcies are bound to surge as US goes into even a mild recession. The counterparties to the CDS - insurers and banks - are going to take massive hits. Bill Gross estimates $250bn.

Financials have become very tempting now. My advice to myself - stay away.

As Fed keeps cutting rates, my money will get a lesser and lesser return in the US. Should I invest in CCS - Comcast BBB debt giving a 7.5% yield? Or will there be a better time?

I bet there will be some major bankruptcy this year. Citi and ML can raise capital, but their smaller brethren will find it difficult. That should cause spreads to widen. CCS is currently at 22. If it falls to 16, it is a no brainer - I will buy a 10% yield on Comcast any day.

1 comment:


Theirs always weakness somewhere.