Labor Day Offers No Magic Remedy, Not This Year

August 14, 2008

In past years, market participants have tended to look to September as a month of promise, a time when the markets come back from their summer holiday, tanned and jazzed for a busy fall.

This year, not so much. “I’m not hearing about a lot of issuance planned for after Labor Day,” one high yield investor told me. In other words, there’s not much sign of a shadow to be found on the shadow calendar.   

Indeed, as of our press time on Thursday, KDP Investment Advisors’ forward calendar for high yield bond deals stood at, well, at nothing. Zilch, zero, goose egg. Market participants have been tossing the word “thin” around, but I’d take it a step further and say skinny, the Kate Moss of primary markets. 

Meanwhile, the loan market is mildly chugging along with smaller deals, not dead, but not vibrant. And folks still hanging onto jobs at the big investment banks are making jokes about tumbleweeds rolling down the halls.

Of course it is August, historically slow and all that jazz. But this year is different. In a recent commentary piece for leveragedfinancenews.com, investor Richard Coons, the founder of Catrock Capital Management, said this month might just qualify as the slowest in 18 years.

Says William Cunningham, head of global credit strategies and fixed income research at State Street Global Advisors, “It’s kind of unprecedented the way the markets structurally have broken down. The access to credit has gone away, and despite that we still have some pretty decent corporate fundamentals—of course, against the backdrop of weak consumer fundamentals. So what does that mean when we look at the supply picture? How long does the supply have to contract before we find a bottom?”

Good question. One that all market participants would like to have a handy-dandy crystal ball to answer for them. But as Mr. Cunningham so astutely put it, we’re sailing in uncharted territory here. And answers don’t come so easy.

So, I’ll leave you with this thought: The markets will return, maybe not tomorrow, maybe not a month from now, but they will return. In the meantime, remember that life does not end at your office door. As I write this from my desk at One State Street Plaza, near a window overlooking the Statue of Liberty, New York is experiencing gorgeous skies and a temperature to die for. In mid-August. And that’s the kind of unusual we should all take advantage of while we can.