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December 2010

Time to buy junk bonds?

"Junk bond default rates have plunged".

Even if 10-yr yields rise further—as I expect they will, since the economy is continuing to grow and Obama's long-awaited decision to go bipartisan on the issue of taxes should impart some genuine growth stimulus to the economy, and forward-looking inflation expectations have risen from 2% in August to almost 3% today—I note that junk yields traded around current levels back in the first half of 2007, when 10-yr Treasury yields were over 150 bps higher than they are today. To pass up 8% yields on junk bonds in favor of cash yielding almost zero is equivalent to saying that all h*ell is going to break loose at any moment.

Thanks, but I'll pass. As I write this, MO is yielding 6.23%, DEO is yielding 4.1%, and JNJ is yielding 3.46%. I'll stick with those.

"Beyond a Reasonable Doubt"

Interesting account that begins this way:

I’ve spent the better part of the week serving as the foreman for a jury in a criminal case. As they tell you, you’re not allowed to talk about it with anyone, not even your fellow jurors, during the trial. As they also tell you, once the trial is over you can talk about anything you want. So, here goes.

And ends:

All I could think as I walked to my car after being excused was this: from chaos comes order. This system that we look at and think that it’s in disrepair, that nobody can possibly fix it or in which you have “activist judges” on one side and uncaring, throw-the-book-at-them judges on the other side just isn’t a fair characterization. What you truly have is a proverbial sausage factory: it’s incredibly messy, nothing seems to make sense, nothing looks good or reasonable or even real, but at the end of the line there is something like justice. It doesn’t always look right. It doesn’t always feel right. It doesn’t even always taste right. But it’s at least palatable. And no matter how it is, it’s never for a lack of sincerely trying.

"From chaos comes order": somewhere, Freddie Hayek is smiling.

Link via Metafilter.