Stocks have surged in recent weeks, but Commercial Mortgage Back Security spreads (among other credit indicators) remain stubbornly wide. Credit markets are not seeing the same drastic change in the economy that equity markets are. This is a credit problem. If this is anything more than a bear market rally we’d be seeing a drastic change in credit market spreads. For the bulls’ sake, they better hope spreads start improving soon or this patient is going to relapse.
Update:
Zero Hedge has a great analysis coming to the same conclusion. Must read.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.