Equity Bull Market?

Believe it or not, with this massive sell-off of the past weeks, we are actually in the middle of a bull rally. While it appears that there will be another more slow and painful downleg from here, a rally was not surprising given the amazingly oversold condition (I am no market timing expert but it was obvious how oversold things were getting). Now I don't think this is any reason to get excited about equities given that fundamental weakness will start showing up in earnings. Remember, it was not fundamentally a valuation bubble in equities we were sitting on, it was an earnings bubble.

Bonds seems to be interesting in this environment. There was an interesting article today about convertible bonds which seem to be pricing at levels last seen some 30 years ago.

http://online.wsj.com/article/SB122575841314895287.html

The one thing about bonds that frighten me is that they are still subject to inflationary pressures knocking around their yield. However, there are several bonds which are pricing at levels denoting distress, whereas the sales may have really been driven by forced selling more than anything. One of my favorite companies, Leucadia National, has bonds currently priced at 10% YTM. For what I consider an absolutely rock solid company, that is an excellent yield.