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1. Corporate Bonds Weak Again
By Tom Graff
7:45 a.m. EDT
Corporate bonds were ignoring the stock market rally yesterday, which I warned was a bad sign. Today the futures are looking ugly and corporates are continuing to push wider: financials 5 basis points wider to start, telecom 5-10 wider, energy 5 wider, tech holding in a little better, maybe 0-3bps wider.
Another bad sign is the poor performance of recent new issues.
Boardwalk Pipeline Partners'
note is about 10 wider than issue,
is 5 wider.
Many names are now a good bit wider than the best levels.
7.5 19 got down to +150, now +215 bid.
6.35 19 was around +115, now +150 bid. Both names hit those tight levels within the last two weeks. Interesting to note that the Barclays Credit Index has only moved 8bps off its tights. This is usually a sign that the pricing services haven't yet priced in all the downside move in corporate bonds.
Long GS bonds.
2. Buffett's NYT Piece Is Worth a Read
By Sham Gad
8:31 a.m. EDT
New York Times
. In short, Buffett praises the decisive actions taken by the Bush and Obama administrations in stopping the economic free fall. Unfortunately, the solution required "enormous dosages of monetary medicine" and "before long, we will need to deal with their side effects."
According to Buffett, these side effects include inflation, but more important is the "dollar's destiny" in this world. The rising debt-to-GDP levels cannot continue indefinitely without severe consequences. We know our legislators hate raising taxes or cutting spending, both tools that would help reduce debt. So if these two options are off the table, the other option is inflation, which ironically is the most perilous tax, because it can go unobserved. Remember several years back when Buffett called financial derivatives "weapons of mass financial destruction"? For years, his warnings went ignored by many. Fool me once, shame on you; fool me twice, shame on me...
3. Leveraged ETFs
By Tim Melvin
1:13 p.m. EDT
I see that FINRA and the
have issued a warning about trading leveraged ETF products. John Gannon, the senior VP for investor education at FINRA, called them highly complex financial instruments that can turn into a minefield for individual investors. This on the heels of the recent regulatory notice to broker dealers reminding them of their responsibilities to investors regarding these instruments.
I see an approval process similar to the one already used for futures and options, with compliance review before you can trade these. The pool of offerings will shrink considerably. I also see a lot of lawsuits ahead for brokers who suggested their use as well as for the fund companies that manage them.
By Timothy Collins
1:25 p.m. EDT
Simply for a
short-term trade, I am buying some
August 450 puts around $6.80.
5. Second Stimulus
By Alan Farley
1:55 p.m. EDT
I got a good laugh reading about the second stimulus rumor. Obama can't sell health care or financial reform these days ... how can he sell another trillion down the toilet?
A "We caught Osama bin Laden" rumor would have more credence today.
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This article was written by a staff member of RealMoney.com.