Global Rally Shines on Wall Street

Some contrarians are fed up with the drama. "Right now we have a subprime crisis that ended three weeks ago despite 6,000-plus stories that it's going to get worse, and a stock market that has barely corrected 5%," writes James Bianco, president of Bianco Research. "These are the perfect scenarios for contrarians to make money."

Bianco believes the subprime market's problems are thus far contained within that sector, "but the safety of the crowd is powerful," he adds.

Standing out from the crowd is a research report from independent fixed-income research house CreditSights, titled "Leveraged, Long, and Liquid."

Harkening back to prior liquidity-crisis-inducing events, namely the Russian debt crisis and Long Term Capital Management, CreditSights' analyst Peter Petas says subprime is not turning into a liquidity crisis or a credit crunch -- yet.

Contagion or systemic financial risk come about only if a huge risk-appetite shift causes Wall Street banks to pull back on credit lines extended to leveraged market players -- namely hedge funds. Thus far, that hasn't happened, Petas writes, adding that brokers could take anywhere between a 3% to 15% hit on earnings and "retain considerable flexibility and resources to deal with market volatility."

Others note that credit remains available in most parts of the market. As reported here, bank credit facilities to high-yield, or speculative-grade, companies hit a record high in February and are on track to better the record by the end of March, says John Lonski, chief economist at Moody's Investors Service.