Lunacy in Bond Land

Try to explain to me how Italian 10 yr yields (Italian debt to GDP is approaching 130%) are now under 3% for the first time ever? Is it Russian oligarch money in search of safe haven? Are equities that unattractive that people would rather invest their money in insolvent governments? It’s not just Italy. All of the PIGS are enjoying record low yields now. Here at home, our yields continue to compress, which is a boon for governments, by the way. We tend to view these things as canaries in the proverbial coal mine. But what about the benefits?

Surely these governments benefit from having to pay less interest income on their insane amount of debt, no?

The only thing that is supremely messed up with this market is the flight out of high growth, money losing ventures, into old man stocks. Why the change in risk appetite now? Did the bubble just pop because time took its toll and people woke up and learned what a price to sales ratio was after years of ignorant bliss? Or maybe there is something insidious lurking beneath the surface?

For the most part, earnings are coming in better than expected– for the momo names. However, most of them are trading down anyway. This morning my CRTO posted much better than expected results and offered a BIG guide up. These guys aren’t valued crazily, at just a tad over 3x sales, so the stock should do well. However, if you own stocks that trade more than 10x sales and they are due to report, WATCH OUT.