Continued Angst Over Credit Crunch Weighs On Market

The market is down significantly this morning on the same fears that were around yesterday. Go figure. There was no real specific news, just lingering fears that a credit crunch is developing, and that it could signal an end to the LBO boom that has supported the strong M&A activity recently.

I think these fears are overblown, but as we said, perception is reality. M&A activity was running at an unsustainable pace, and was due for a breather. Late summer heading into August is a natural time for this slowdown to occur.

Sure, the pressures in the subprime and high-yield credit markets are exerting pressure, but I don't think it signals an end to the LBO game. Corporations still have a ton of cash on their balance sheets, and private equity is still flush with cash also. I think yield spreads will narrow again, once this mini panic subsides.

On the earnings front, strong earnings from AAPL and QCOM don't seem to be enough to offset the surprising weak numbers from Exxon (XOM). And oil is up today, near $77.

But bond yields are falling again, with the 10-year down all the way to 4.84%. This should help support the markets, and improve liquidity. The VIX hit 20 this morning, the same level it reached back in March.

With that, I am going to start making my first leg of purchases with the cash I had earmarked for a correction. Since it is difficult to time the exact bottom, it makes more sense to make your buys in stages. Get to work.

long AAPL, XOM