We Are Not Out Of The Woods

True, the equity markets have rebounded in reaction to the Fed's cut

True, banks have priced and sold a few chunks of High Yield bonds

True, the headlines of the economy sound merrier than they did in August

Nevertheless, all of these facts do not imply that the massive glut of over-liquidity has finished its impact on the system.

Just today the WSJ spelled out the fact that the remaining high yield bond overhang is massive. And coupling this with the fact that GS today reported that its holdings in CDO's and CLO's fell by over 50% last quarter (whether in volume or price it has the same impact) and the fact that Bond investors have openly stated (as noted in an earlier post) that they are not seeing an end to the cycle and you start to get another picture.

Adding to this the fact that GS today disclosed that it has even more assets that "trade so infrequently that there is virtually no reliable market price for them" and strange headlines about CDS traders like: Calyon Trader Fired for Losses Says He's No Rogue and the fact that the real estate market is still in a downward spiral and clouds start to grumble on the horizon.

Maybe I am grumpy just because it is now raining and the summer is over, or maybe it really is getting dark again.