Two Bits of Good News for the Credit Markets

I've noticed a few pieces of good news starting to peek through, though still a lot of bad news out there. It makes me think about an interesting book I read, called Anatomy of the Bear. It's published by CLSA and looks at the four worst bear markets of the 20th century, this one not included. What I like about the book is that it doesn't hit you with all kinds of vague pronouncements and conjecture as to when "the cycle has turned". It's pretty fact-based, simply recounting what happened step by step, piecing together the story from old news clippings. It provides a reader with news in chronological order both leading up to and following market bottoms.

This means that the book is a useful read even if in the end you don't agree with the author on some points. Nevertheless, of all the information and analysis provided, I found the most interesting to be the author's conclusion that for each of the four bear markets analyzed, market bottoms did not come when bad news was at its peak. This sort of proves false the maxim that it's the best time to buy when things look the worst. The interesting thing that the author found is that actually, for the four bear markets analyzed, what marked a market bottom was when good news was increasing, yet was being still being heavily discounted by the market. So just as bad news can get heavily discounted and ignored towards peaks, the author shows how market bottoms can be when good news in regards to signs of a turnaround is already out there, but most simply don't believe it yet or just ignore it after being shell-shocked by the bear market.

Am I saying I think that we're there now? No. I have no conviction in terms of where we are in terms of a turnaround. But anyhow, Monday I saw two interesting, positive pieces of news which at least made me think of this great CLSA book mentioned above.

WSJ blog on easing credit markets (Note the quick M&A implications of this for situations such as DOW/ROH below):

Now, the full week’s data are in, and it is looking certain at least that the credit markets are more open than they have been for at least a year and investor appetite is allowing for multibillion-dollar deals. Last week, companies raised $152.6 billion by selling debt to investors. That is the highest volume since the first full week of 2008, when volume was $176.3 billion, according to Thomson Reuters data.

It is a sign that investor nervousness has dispelled considerably since the near-total shutdown of the summer and fall, when bond investors were reeling from the unexpected collapse of Lehman Brothers Holdings and were reluctant to deploy their cash.
Now, big deals are packing the market. Of the 105 debt offerings last week, more than one-third, or 37, were bigger than $1 billion, according to Thomson Reuters.

Report from an auto consultancy saying auto sales could bottom in 2009:

The Northville, Mich., firm projected 2009 global sales would fall about 8 percent to 56.8 million units. However, CSM forecast 2010 sales would rise nearly 7 percent to 60.8 million units.

CSM said it expects 2009 sales in the U.S. to hit a 27-year low of 11.5 million, then rebound to 13.6 million in 2010.

Of the two articles above, I find the second to be potentially questionable. I note that CSM has pleaded with Bush to intervene to support the automakers and has written how a bankruptcy would be disastrous. I don't know much about the CSM, but perhaps they are to be taken with a grain of salt, such as the National Association of Realtors, whose research was proven an intellectually dishonest joke during the housing bubble and downturn.

Well at least the first article above is positive, and credible since based mostly on fact rather than forecast. In addition to a lot of other things, it could help selected M&A such as DOW/ROH tighten, as refinancing of debt becomes increasingly viable and market worries are reduced.

If anyone has any other suggestions of M&As currently facing uncertainty due to refinancing/debt burden worries, feel free to leave an idea in the comments, as they might benefit if indeed credit markets loosen a bit as the WSJ blog suggests.