Credit Markets More `Rational' on Rate Cut, SCM's Bublitz Says
Source: Bloomberg - September 18, 2007
September 2007

SCM Advisors' Chief Strategist Maxwell Bublitz was quoted extensively in an article by Caroline Salas on the Federal Reserve cutting its benchmark interest rate, and the rout in the global credit markets.

Quoted from Bloomberg:

On risk premiums falling in the credit markets, including the CDX North America Investment-Grade Index:

``We're well into the process of putting the credit crunch behind us. As you see the CDX come in and you see the commercial paper markets open back up, it's emotion coming out of the market. The Fed doesn't frankly care when spreads widen up, they just want it to be rational.''

On concerns about hedge funds:

``I've likened the credit crunch to a shipwreck and I still expect more bodies to flow to the surface. The one on the horizon right now would be to see how hedge funds handle the redemptions. There could be some forced selling, some leveraged unwinds.''

On expectations for further rate cuts:

``I was expecting 25 but I wanted 50. As we head into the second half of the year we're going to get some pretty weak economic data. If the Fed had started on a serial 25 basis-point ease the big fear would have been the dollar. That still may be. "

``I expect more cuts before this thing is over. I wouldn't be surprised to see another cut before the end of the year.''

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