Quote:
Originally Posted by Bobblehead
I'm not convinced that any recovery will be springloaded.
There are companies out there that have financing that will need to be renewed. I can't see credit being near as easy to come by as it was when these firms initially got financing, so who knows what will happen.
For instance, XM/Sirius; they have $1 Billion dollars in financing coming up for renewal in a couple years. Unless they have a pretty darn solid business plan I think they may have trouble getting that money. How many other firms are going to need to attempt the same thing and how it works out for them is an unknown. The investment banks that remain are going to be picky, both by necessity and because with fewer lending venues, they can be picky. I just can't see the credit being relaxed enough to allow a spring loaded recovery.
I can see markets being fairly volatile for a while and trending back up, but I don't think in the future we will be able to look back and see a single spike that represents "the recovery".
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Credit markets are a good place to look for signals as they generally give signals that help tell when things begin to improve.
Defaults of US high yield bonds and loans have totaled of $30b par value so far in 2008. Compare that to $160b from 2000-2002 which was not considered to be near as bad a period as what we are facing now. This is early innings.
There will be a time to buy. This is a once in a lifetime opportunity to pick up market leading companies at bombed out prices. I have bough some equities but i have more than hedged those with buying double short ETF's. The stocks I have bought are higher dividend, strong market leader, and strong cash flow. Return on equity is good to look at while P/E ratios are a joke. Equity analysts collectively think S&P500 earnings will grow +7% still in 2009.
History suggests that markets will rally quickly.....when markets bounce back from a recession, 1/3 of gains happen in first 30-40 days. Stock market bottom has averaged to occur 4 months before the economy bottoms. So i guess timing wise, don't wait for GDP to turn positive, but look for some economic indicators looking like they are turning around.