Ask a Technical Analyst

[hawk59]

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Where junk spreads are at historically low levels

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You havnt been keeping your finger on the pulse.

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Where junk spreads are at historically low levels, risk is supposedl non-existant, selling CDS at 20 bps is actually thought of as a smart strategy, and raising $10bn for an LBO is no big deal and can be done on good terms? No you did not predict this, you had no idea, neither did anybody else.

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This has all changed in just the last week. Big LBOs have been canceled and spreads have blown out.

Im not talking about the change in the market over a 5 year period, but the conditions inherent in the market for the last 5 years or so. If you rolled out of bed in the morning, stuck a pen in the WSJ bought that stock then sold it in the evening you would have been more likely to show a profit then a loss. Therefore when someone says I did X analysis and showed y profit we cant be sure it was the analysis that led to the profit as it may have been pure coincidence.

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The market tends to rise over time so you could say that about any time period, by your argument every single day is equivalent to any other. Why were the last 5 years different from any other time?

All the stuff that has happened recently is irrelevant, the point was the change in the market was completely unknowable and at the time nobody would have predicted it.