Break Dancing

"I've been to every city in Mexico. I came across an unclaimed piece of meat in Baja, turned out to be Rosie. I guessed he picked a knife fight with somebody better. Found one of your passports to Sumatra, I missed you by about a week at Fiji. But, I knew you wouldn't miss the fifty year storm, Bodhi. "
--Johnny Utah (Point Break)

Nice data indicating the reduction in various risk spreads over the past few months. The 'green shoots' sprouting from this info are prompting many to conclude that the worst is over for the credit markets and that a turnaround is forthcoming.

In the near term, my sense is that market participants might channel this optimism into significantly higher prices. This is why I can't get too bearish right now and may in fact play the upside to some degree.

But keep in mind what's tightening these spreads: massive money printing and borrowing. Over consumption and debt were the drivers behind the recent collapse. We're now feeding more of the same into the system. To the extent that this stimulus reflates the monetary system, then we're destined for another ride lower.

When? Wish I knew, cookie. But my sense is that is could be the Fifty Year Storm.