Evergreen Virtual Advisor
Click here to view as PDF. "There are no atheists in foxholes or ideologues in financial crises." -Fed Chairman BEN BERNANKE Points to Ponder 1. The primary measure of stock market volatility, the VIX, recently hit 80, the highest level ever recorded. Even readings of 40 are considered extreme; thus, the current number is truly incredible. 2. The stock market collapse has been so intense that, according to the Wall Street Journal, 10% of all listed companies are trading below their cash holdings. This is comparable to what occurred during the Great Depression. Additionally, nearly 40% of all stocks tracked by Standard & Poor’s are trading at 8 times earnings or less. 3. Investment-grade corporate bonds have also been caught up in the selling frenzy, with some leading bond mutual funds having lost 25% or more year-to-date. Yield differentials (spreads) versus treasuries on junk bonds recently hit an unprecedented 15% and nearly 6% on high grade debt. This means their absolute yields reached 19% and 10%, respectively. 4. In one faint ray of hope for the credit markets, the prices of AAA-rated sub-prime collateralized debt obligations (CDOs) have risen from around 50 cents on the dollar to close to 60 cents. This may indicate that the government’s mortgage stabilization fund (TARP) might already be helping, even before it actually starts buying. 5. Retail gasoline prices have fallen from $4.11 in July to $3.03 recently (and are likely headed even lower). According to Merrill Lynch, each one cent decline in pump prices represents $1.3 billion in relief to consumers, amounting to roughly $140 billion overall. Read More
