The Junkman Cometh

They say that "one man's trash is another man's treasure". Could it be that we are approaching a time when junk turns to gold? If you are a believer in cyclical patterns, this should be of no surprise to you. What was up is down, down is up. China is spitting out IPO's, America vilifies capitalism...and somewhere a rat faced financial wizard is giggling his guts out.

Perhaps the one thing the entire world agrees upon is that governments from D.C. to Bangkok are running around like headless chickens, clueless about their next step. The U.S. is leading the organized confusion with clumsy attempts at financial regulation, a soaring government deficit and a public witch hunt on all things capitalist. Scratch sovereign debt. Stuffing your savings in a sock drawer is yielding better then a T-Bill.

What does that leave us with? Where do we park our cash for safe returns? Perhaps in times of malaise, it's ill will that is the safest investment vehicle. In other words, at a time when everyone is cautious or even downright panicky, maybe the riskiest investment is safest. More than a few solid companies have seen their credit ratings downgraded due to external factors effecting their business, over the past couple of years. Some of these companies did not survive, those that did may be a good bet in spite of their respective debt grades.

From the numerical side, Paul Kedrorsky compares current default rates to what we have seen in the past and arrives at a conclusion that may have investors singing the praises of Mike Milken yet again.