This is another good read on CDOs et al from the Sydney Morning Herald. All I can say, is that this will eventually end in a very, very, very bad way. It's more than a feeling, it's a script that has played out many times in histoire where excessive debt and leverage coming undone, unravels all else in financial systems. It's leverage at the heart of financial blowups, and a changing of the rules. I'm curious to see what they conjure up in Congress in terms of tax changes for the LBO operators - hearings get underway on Capitol Hill in the coming week.
As for the stock market, weekly RSI is starting to look better and perhaps my call in late Spring for 1550 on the S&P still has a chance. But with rising oil and bond yields I just wonder how much of a chance. Perhaps earnings and corporate outlooks will do the trick? We'll know soon enough as they begin to flow in the coming week. Oh, and did I mention the falling dollar? Sooner or later someone is going to notice that and start asking more questions.
I was chatting the other day with Sam Stovall, chief investment strategist at S&P, and he reminded me that we have yet to see a real 10% correction in this present bull market phase. Sam also noted that Q3 is the worst performing quarter of all the quarters of the year, though July is the strongest month of the 3rd quarter.