On the Bubble

When all is said and done, barrels of oil spilled in the Gulf of Mexico could possibly be in the billions, not millions. Watching the oil continuing to gush would lead even the most unsophisticated observer to the conclusion that trouble continues to brew.

Listening to Standard & Poor’s officials discuss ratings of European countries, including the UK, would lead even the most unsophisticated observer to the conclusion that trouble continues to brew. (Did I just repeat myself?) The UK has just announced an emergency budget, Spain needs additional measures to met fiscal targets, France has announced high deficits, and Greece continues to melt like the Wicked Witch of the West.

However, keep in mind, that while the aforementioned events are headline news, little notice is being taken of the increasing expansion in spreads between investment-grade bonds and junk-bonds. In April, the height of the bear market rally and when complacency was at its greatest, the difference between yields of investment-grade bonds and junk-bonds was the lowest in many years. In other words, there was no reward for taking risk, and the market bubble in junk-bonds had reached historic proportions. Like all bubbles, such as dot-com, housing, oil, and tulip bulbs, few recognize the environment they’re in until it’s too late. (Although, I might add that very quietly, a few smart money types are in fact leaving the bond risk-trade and re-entering the safe haven of U.S. Treasuries.) Unfortunately, the general public, just like in all other bubble situations, will recognize their mistake after the fact. Once again, too late.

Alas, if only on careful examination, even the most unsophisticated observer will be left with the conclusion that trouble continues to brew.

Till next time,

Bill


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A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Vice-President Joe Biden Touts the Success of the Stimulus Program!

The U.S. economy added 431,000 jobs in May. However, don’t forget to subtract the 411,000 census workers, 31,000 temporary health-services employees, and 215,000 jobs due to the birth-death adjustment. That equals a negative 226,000 jobs. In addition, the unemployment rate declined from 9.9% to 9.7% because 322,000 people dropped out of the labor pool. Finally, those unemployed longer than 27-weeks hit a new record of 46%.

Hey Joe, how’s that for success!

Till next time,

Bill


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A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Famous Last Words

“Attempting to manage risk in an environment where everything that could go wrong does go wrong seems like a fruitless endeavor.”

- Brad Balter (Balter Capital Management, LLC, a Boston firm that invests in hedge funds for clients.)

Remember, in our current economic environment, the only defense might be taking a contra position to the stock market. When everything that could go wrong does go wrong, short positions, government bonds, and cash may not be a fruitless endeavor.

Till next time,

Bill


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A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.