Whitney Tilson’s email to investors
Alan Gula's Comments
5) Alan Gula, a senior analyst at Stansberry Research, shared these comments with me yesterday and gave me permission to share them:
Funny how unlimited [quantitative easing] and a stimulus package equivalent to 10% of GDP (CASH CANNON) cause stocks to rise.
I agree with your assessment. There will likely be some sharp pullbacks, but I think they should be bought.
The credit markets remain open... 18 investment-grade issuers priced $35 billion across 33 tranches [on Thursday]. NVDA, HD, TGT, ED, CSX, MS, and CVS all issued bonds. Pessimists will say that these companies are just rushing to issue while they can. But I think the issuance is positive considering that we didn't see this in late 2008.
Total U.S. corporate bond issuance was only around $80 billion in the entire fourth quarter of 2008. There was more investment-grade issuance than that this week.
And if investment-grade and high-yield spreads tighten, it will be bullish for equities. (I have long believed that the most important second-order effect of quantitative easing is spread tightening.)
Right now, high-yield sector spreads are all wider than 600 [basis points] (in particular, high-yield spreads in the energy sector blowing out to wider than 2,000 basis points shows devastation reminiscent of the global financial crisis).
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