A friend said to me yesterday that the market falls were over, surely. He brokers insurance and does not have to get his equity calls right. What he has is an acute case of Bad News fatigue filling the vacuum left by time in between slowly unfolding events.

There is relative cheapness around between equity sectors and between market capitalizations. But historical bargains are mighty few and only then after detailed, company specific, bottom up trawls. As the IMF thoughtfully reminded everyone yesterday credit remains a bit of a problem. Especially if you need some. Residential through to corporate credit is squeezed and it is quite impossible to work out the size of the overall problem - whatever surprisingly precise number the IMF might come up with.

The ultimate culprit is leverage against poor credit risks and from this, amid all the chatter, there are only two exits. The credit risk improves; or the lender takes a write-off (or its logical extension, the lender fails - another form of write-off). The FT has had a few articles covering the form this danger is taking in today's leveraged context - counter party risk - of which these are 1, 2 and 3 examples worth looking at.

Pictorially it is not easy to argue that this has been taken on board by equity prices compared to the 2000 peak - even after making an allowance for 9/11.



Sideways continues to look the most optimistic short-term possibility; but a shock crisis in some financial looks better odds given that interbank lending spreads remain persistently in Bear Stearns territory.

As a footnote, three wonderful articles (and graphics) in the NY Times today – A boom that wasn’t; Asian inflation; and Farmers spurn conservation.

The first two do not make for the greatest news for US consumers or proponents of decoupling. The third piece with its intriguing graph is potentially good news for food price levels a few harvest from now (but not good news for ducks). 35-odd million hectares taken out of production since the mid 1980s is an astounding 8% of US land under cultivation.

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