What to make of today's market drop?

Credit Markets to Stock Investors: Calm Down


So why are stocks falling?

The difference between the two asset classes this week may in part reflect stocks’ more exuberant start to the year.

Equity markets drew record inflows and the S&P 500 rose 5.6% in January, its biggest monthly gain since March 2016. Since the beginning of the year credit spreads on both the euro and dollar iBoxx corporate indexes have declined by roughly 0.1 percentage point. “All of the discussion at the moment that is negative about the equity market, none of it is about the economics, it’s all about those valuations and ratios,” Mr. McAlpine said. I

nvestors have been debating whether U.S. stocks look expensive, and what valuation should be used to measure that. The S&P 500’s 12-month rolling price to earnings ratio, a popular valuation measure, reached 23.4 in January, its highest level since 2002.

But not everyone believes that the message from corporate debt markets is the correct one. On Monday, S&P Global Ratings warned that the global proportion of highly leveraged companies, with a debt to earnings ratio above five to one, has risen by 5 percentage points since 2007, to 37%. Higher debt levels leave companies vulnerable to unexpected fast increases in interest rates, which would make it more costly to pay off their debt.

Comment: So what is Jim doing? Today I bought 6 shares of DUK. Source of above 

The Day After:


  1. Jim, did you buy at $75.85? I heard they might have a discounted sale tomorrow at a better price.

  2. Jim, do you think the Russians are causing the stock market collapse? I think they are behind it and should be investigated.

  3. As the great Kenny Rogers once said, "You gotta know when to hold 'em, know when to fold 'em." I agree. Picking the bottom can be difficult.

    Did you buy bitcoin? If so, what price?

    1. Wouldn't touch it. I looked into it but no would not.

      The blockchain technology behind Bitcoin has some good business benefit as in Trains and blockchain? BNSF becomes first Class I railroad to join this high-tech alliance

    2. Carl Icahn: Bitcoin and other cryptocurrencies are 'ridiculous' — 'I wouldn't touch that stuff':

      Billionaire investor Carl Icahn told CNBC on Tuesday that he has an unfavorable view of bitcoin (Exchange: BTC=) and other cryptocurrencies, calling them "ridiculous." "I don't like the cryptocurrencies only because, maybe I don't understand them," the chairman of Icahn Enterprises said in an interview on " Fast Money Halftime Report ." "How do you regulate them?" "Maybe I'm too old for them," Icahn said, "but I wouldn't touch that stuff." Bitcoin was recovering from three-month lows Tuesday, trading near the $7,000 level, according to CoinDesk. Bitcoin and other cryptocurrencies have dipped in recent weeks amid worries about increased regulation. Despite bitcoin's popularity, there are also more big-name naysayers. At the World Economic Forum in Davos, Switzerland, last month, bitcoin was hammered by many top business leaders. J.P. Morgan Chase Chairman and CEO Jamie Dimon has said virtual currencies would never be a major competitor to the dollar. But he's indicated blockchain could be used for more efficient transactions. Dimon recently said he regrets calling bitcoin a "fraud" back in September. Last month, billionaire investor Warren Buffett told CNBC he believes the recent craze over bitcoin and other cryptocurrencies won't end well. Even late last year, Icahn said bitcoin seemed " like a bubble ."


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