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As we have been discussing our Morning Call (please call Jen White Kane or me at () if you have an interest in participating in the Morning Call), LIBOR doesn’t lie, people do.

We would have expected LIBOR to increase, particularly in light of the Madoff fraud ($50BN in assets gone!), but LIBOR continues to come in. As a measure of global counterparty risk, on balance, this is about as good as reference rates get (given Enron like fraud) and is a key unpinning of our bullish view on global equity markets in the immediate term.

In addition, the TED Spread continues to tighten as well and has narrowed to a level not seen since early September. This implies that the market is pricing in a much lower level of credit risk than in the past couple of months and that liquidity is improving sequentially.

Daryl G. Jones
Managing Director