NOTED

What we don't like right now:

1) Insurers, brokers fall by 10% daily limit in China. (A ton of new issues coming to market)
2) NYSE short interest hits record last week.
3) Borrowing short, floating -rate paper now accounts for 54% of overall issuance, up from 26% in 2002, and an huge $565 billion in corporate bonds have to be rolled over this year, 34% greater than last year.
4) The Municipal bond market remains frozen.
5) $36 billion has left the US stock market since the beginning of February.
6) Food prices are about to jump very materially this summer.
7) Property stocks in China are off 50% from their highs, some trading below NAV.
8) Yet more money is chasing private equity and hedge funds from major teacher retirement funds.
9) Bonds have clearly made a bottom in interest rates here...
10) Covenant cushions from corporate bonds are being tested, a current record 41 companies with high-yield, high risk ratings are in danger of default. This market for junk debt is also closed right now. In the first half of 2007, an average of $3.9 billion of junk bonds were sold every week!
11) Exxon did not replace what they sold last year in terms of new reserves....Additionally when oil trades above $100 bbl contract clauses with many host governments trigger new contract terms in favour of the governments not Exxon....a major negative for future supplies. Exxon currently has enough reserves to last 14 years.

Interestingly and importantly the equity market is "hanging in there" we have to remind ourselves the well run companies in leadership positions take major market share here when the weak are scrambling like right now....

The "Crash" is in everything related to debt and we remain very early in this cycle of debt retirement, pay down, write offs and work outs.

The people running for office on the left will only make this situation worse. Especially at the state levels so dependent on income as their budgets also are way out of line with reality. The cost of capital is going much much higher and everyone is missing this in a reflationary market squeeze we are in now for a generation.

Recent buys, HMT, APB, GCH, TLM, GDX, ABB, CDE...we remain long the current and future winners.

Danny Boy seen here senses spring is around the corner.