Wednesday, 17 September 2008

Market update

Some amazing numbers: 3m TED spread 275bps, 1 month OIS/Libor over 100. AIG CDS at 1500 over, down from 3500 over earlier. Goldie down 20%, Morgan Stanley 30% odd. WaMu not bust yet, but give it a few days. Russian market shut after the index fell 17% yesterday. And the FED has run out of money. Welcome to 1929 Part II. Like all sequels it isn't as good as the original, but it has a few moments of interest.

Short: docklands CMBS, any bank rated less than AA+, dollars, TIPs, AIG senior CDS
Long: equity in too big to fail banks, on the run 2-3y Bunds, corporates with no gearing and solid recession proof earnings.

Fundamentals and long term credit worthiness is irrelevant. This is a strenuous flight to quality. Anything that isn't a government bond is suspect and only worth buying if the potential upside is huge. It might not be quite the end of the world as we know it, but I do feel fine, and it is an interesting time.



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