Big sell-off!

The market had a huge sell-off today (it also dropped sharply on Wednesday). Practically all asset classes and sectors, ranging from gold and commodities to foreign markets to big-name S&P 500 companies were sold off. Although the correction was pretty big, it isn't anything big in terms of the advance the markets have had this year (most are still up a lot, with the Chinese market up in the stratosphere somewhere). A couple of assets/sectors that rallied today (from my quick look) were US treasuries and the Yen.

Since there are so many cross-currents in play (eg. rise in high yield bonds, housing sales & price decline, weakening currencies) it is hard to say if there is one major cause. The debt market is re-pricing the higher yielding bonds, which had ridiculously low yields IMO. The CLOs (collatoralized loan obligations) seem to have had a rough time lately, and this may be the end of the LBO boom we have been seeing. LBOs have been responsible for some of the appreciation in the markets over the last few years.

The Yen strengthened sharply today and if this is a big correction then I wonder if this is the start of the unwinding of the Yen carry-trade.

It still remains to be seen if this is the start of a big correction... or if bulls will resume their run soon...

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