- An economic recovery is not nearly as visible as the optimists would like you to believe. There remains a long tail to today's problems.
- Credit will remain dear, despite evidence of a statistical thaw in credit -- the three-month LIBOR stands at 2.18% (down from a peak of 4.75%), the TED spread is at 1.7% (down from a recent peak of 4.60%), two-year bank swap spreads are at 105 basis points (down from 160 basis points), the LIBOR/Overnight Spread is at 1.6% (down from a recent peak of 3.60%); all these measures are now below pre-Lehman bankruptcy readings -- as pendulums nearly always move to the opposite extreme.
- Finally, the uncertainty regarding corporate profits (i.e., the lifeblood of a bull market) remains the single most important reason why, over the foreseeable future, a sustained rally in equities seems unlikely.
Kass: Getting a Grip on the New Reality
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