So Where Are We Now — Normal? – The Aleph Blog

Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control

Posted on 29 September 2007 by David Merkel

Maybe things have normalized.? After all:

Implied volatilities have fallen below long-run averages for equity indexes.
The equity market is within spitting distance of a new high.
The Fed is loosening (will they do more?)
The discount window is largely vacant.
Away from real estate, and real estate finance, things seem pretty chipper.
The yield curve is normalizing.
Inflation as measured by the government is low.
Long term interest rates are low, for investment grade borrowers.
Commercial paper problems are gone.
LBO debt difficulties will be solved soon, through a combination of losses to the banks, and canceled deals.

Or maybe not:

Inflation is rising globally.
The dollar is weak.
US inflation should start to rise as a result.
Housing prices are weak and getting weaker.? Default and delinquency statistics are rising.
The CDO [Collateralized Debt Obligation] problems are still not solved.
Defaults should begin to increase significantly on single-B and CCC-rated corporate debts in 2008.
The TED [Treasury-Eurodollar] spread is still in a panic-type range.

I’m seeing more of my stocks get closer to the upper end of my rebalancing range.? I will begin reducing exposure if the market run persists.? I’m not crazy about the market here, but I am not making any aggressive moves.

David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.