Ring-wall ostrich guidance  – is being provided by many on the Street, as far as how they interpret both the High Yield ‘risk’ (of course the keyhole exit really is behind, especially in that investment segment), and as relates to upcoming FOMC decisions and their ‘statement’ following the meeting. Analysts and economists are paraded in media, desperately arguing how most junk bonds are diversified for liquidity and not problematic relative to what we’d seen with Third Avenue. Be careful; there’s more than a whiff suggesting this is a far broader concern, whether held together or not. That’s why Goldman today suggested buying; contributing to the broad equity turnaround as well; notably as the S&P went below the November lows. (Many firms will do their own work but are reticent to oppose any directional move Goldman takes; so fall-in-line. I think we saw some of that with today’s turnaround as it threatened to go lower, under the November lows on S&P. I’m of course not going to say they issued their statement to shore-up markets.) 

We thought you’d get a snapback after breaking the November lows; running a slew of shorts before the market goes on-hold (or gets nervous jitters) ahead of the FOMC decision on Wednesday and then straight into the enormous Expiration. I heard some say today that there was a rumor about a large Put position and some ‘now’ say there isn’t and that was just a rumor. Well, we shared that a week ago and the market went a lot lower before bouncing. The heart of that story was an early dive, before the Expiration, not simply after (though that’ possible too; as well as an ensuing set-up for some sort of effort to stabilize then -perhaps from a low next week- into the end of the year… but that’s a possibility for next week if at all). The market remains tentative and dangerous; with traders very nimble. Now, as to the defense of ‘junk’ and argument that one shouldn’t extrapolate on the basis of Third Avenue or other redemption ‘gates’. Well it’s not so simple to justify dismissing concern, as some of the credit guys are doing. Contagion to IG (Investment Grade) matters as well. The biggest buyer of stocks these last few years are about to be priced away as (cheap debt) funding dries up, removing the biggest pillar of delusion from current equity valuations. With the leverage as used, it’s not merely an issue of having a tiny increase from a ‘dovish’ FOMC that accompanied by a soft (least hawkish) statement.