In spite of the recent rally, I think there is something troubling about the current state of markets. This isn’t about valuation or levels necessarily, thought that is part of it, it is more about how markets are trading and what direction we are being pushed to. I think my concerns can be highlighted by looking at a few key questions. From there, we can examine how to deal with this “rotten” state of the world. The questions I want to look at are:
Are we responding too much to daily, often spurious, correlations?
If corporate bonds are so illiquid, why can we bring billions of new issues?
In a healthy market, should “free money” exist?
Are the rating agencies trying to catch up?
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