Press Coverage & Articles
Quotes and Comments by SCM Market Specialists
Second Quarter 2008

Subjects include:

• Ongoing Credit Crises
• Implications of a shrinking financial system
• Second half forecasts on fed policy and interest rates

Media outlets include:

• New York Times
• Barron’s
• Business Week
• Reuters
• Bloomberg
• Dow Jones Newswires
• Market News International

Investors Business Daily
Surging Oil Futures, Hot Core PPI Data Raise Inflation Fears
May 21, 2008
“I’m not seeing a lot of those core pipeline pressures being passed on to consumers – I’m seeing it impact profits” – Maxwell E. Bublitz, Chief Strategist, SCM Advisors

New York Times
Investors Retreat on Gloomy Forecasts
May 21, 2008
“Are we not going into a deep recession? I don’t know. But I don’t see any way that it’s not prolonged” – Maxwell E. Bublitz, Chief Strategist, SCM Advisors

Reuters
US Corporate Bond Yields Hit Six-year high – Merrill
June 11, 2008
A resurgence in risk appetite after the rescue of Bear Stearns had helped bolster demand for corporate bonds in April and May, but investors' appetite has been quenched somewhat by the heavy supply, said Robert Bishop, portfolio manager for SCM Advisors in San Francisco.

Although average yields are rising, new issues are not as attractive because issuers are not paying the generous yield concessions they did in the spring.

Much of the April and May supply came from financial companies bolstering balance sheets after massive write-downs, and they were willing to pay up because they needed the money, Bishop said.

"A lot of deals that came when the market first reopened were just too good to pass up," Bishop said. "Even if you weren't really looking for credit, if you were a total return manager there were some awfully good opportunities, and that's just not the case any more."

Dow Jones Newswires
MONEY TALKS: Treasurys Face Re-Run Of Nov Inflation Debate
June 16, 2008
"The markets in their own way are fearing that the Fed might make a mistake," said Max Bublitz, chief strategist at SCM Advisors. "I think it (a rate hike) would be even a greater mistake than back in November."

Bublitz said that if the Fed is indeed engaged in tough talk without action, the Treasurys market will be in for another adjustment. The 10-year Treasurys note could make another run at 3.50% from a current level of 4.21%, while the spread between two-year and 10-year notes could widen to 175 basis points from the current 130-basis-point spread right now, he said. That sort of a move "wouldn't surprise me at all," Bublitz said.

Of course, if the Fed does indeed turn out to be serious about raising rates, or the market remains steadfast, then there could be an equally large shift in another direction as investors redeploy their portfolios. "At some point you've got to toss the fundamentals aside and look at the price action," Bublitz said.

Dow Jones Newswires
US JUNK DEBT: Market Weakens Again; Intelsat Offers $7B Bonds
June 24, 2008
"There's a lot of weakness," said Al Alaimo, high-yield portfolio manager at SCM Advisors. "We've had a general selloff in high yield since weak auto data last week and Ford's profit warning, plus there's just ongoing concern about oil prices, inflation, consumer confidence and the economy."
Market News International
Talk From The Trenches: Tsys Focus On Positives From FOMC
June 25, 2008
Perhaps the market agrees with Max Bublitz, Chief Strategist at SCM Advisors who says it's still premature for FOMC to begin tightening.

"With employment deteriorating, the financial system continuing to shrink, home prices in a free-fall and consumption getting set to slow, the Fed does not yet have the cover it needs to tighten policy," Bublitz said.

Bloomberg
Bublitz of SCM Advisors Says Two-Year Yields to Fall to 2.6%
June 25, 2008
Maxwell Bublitz, the chief strategist in San Francisco at SCM Advisors LLC, said yields on two-year Treasury notes will decline as inflation wanes, the U.S. economy slows, and Federal Reserve policy makers refrain from raising borrowing costs again this year. The firm oversees about $12 billion in fixed-income assets.

``There is scope for the two-year taking a run on 2.60'' percent ``in the not-so-distant future. Data through year end will be balanced by economic weakness. ``I don't see the type of economic data coming across that would allow the Fed to tighten. Given what a lot of people are pricing in, they can still be surprised by weakness. ``The story in the second half of the year is consumption beginning to dry up.''

On interest-rate futures:
``I clearly don't see a Fed hike this year. I'm more concerned about economic risks and I think that as we get towards the end of the year fed funds futures may actually be more balanced between easings and tightenings than they currently are.''

On inflation:
``I'm with them in that I expect it to moderate. My fear is we might even have a month or two where the gap between headline inflation and core inflation actually goes up because of the pop in energy prices. That will embolden the hawks.''

On the Treasury yield curve:
``I'm looking for at least over the next two to three months a bullish steeping. We're going to position that way. We'll get ample opportunity to put those trades on because I have this feeling that the market's not going to like the little blip in headline inflation that could be coming our way over the next few months'' due to rising energy prices.

Dow Jones Newswires
MONEY TALKS: Best Fed Route Is Long On Talk, Short On Action
June 25, 2008
"Expect plenty of clarification and/or amplification from FOMC members over ensuing days and weeks, which no doubt will lead to countless rounds of analysis," said Max Bublitz, Chief Strategist at SCM Advisors LLC, in a note after the decision. "The bottom line, from my point of view, is that it's still premature to begin tightening."

BusinessWeek
Goldman Moves, Oil Spike Sinks Stock;…
June 27, 2008
“The shrinkage of the financial system is a big deal because the only way out is to raise new capital, which dilutes existing shareholders,” says Max Bublitz, chief strategist at SCM Advisors in San Francisco.
With even the most conservative firms having leverage of 10 to 15 times their assets, each writedown of portfolio value means that much less lending investment banks can do, he says. People are wondering who will provide the capital these firms need to stay in business and at what valuation levels they will be attractive to sovereign wealth funds, hedge funds and private equity firms, he adds.

“Both supply and demand for credit are going down at a time when the consumer is hunkering down,” he says. “What kind of earnings are these firms going to have?”

A closer focus on that cycle is one reason for the deepening malaise in the market, says Bublitz. Another reason is that investors are starting to grasp the implications for the economy of a retrenchment by consumers, who are under a “full frontal attack” from deteriorating values for their homes and investment portfolios, and higher food and energy prices, he says.
“We might only be in the second inning of a consumer retrenchment and that could play out for a while,” he predicts.

Barron’s
Opportunity Now Lies at Short End of the Market
June 30, 2008
Max Bublitz, chief strategist with SCM Advisors in San Francisco, which oversees $5.5 billion in assets is also bullish on short-dated securities, and for many of the same reasons. But he adds that “I tend to fall out on the weakening economy side” in the market’s current debate about the outlook, and that expectation of tepid conditions is a plus for things like government bonds.