It’s over, man. We are now in June 1930… repeat, just like we repeated 1929 in 2008 and repeated the 40 plus percent rally in Nov 1929 to April 1930… Now the real pain begins… The DJIA collapsed 89% over the following 2 years until July 1932 bottom.

We sincerely hope Ron is wrong. But the similarities between the recent sucker’s rally and the Nov 1929 to April 1930 rally are eerie to say the least.

Corporate bond spreads are still pricing in “a very bad economic and financial market scenario,” says David Rosenberg at Gluskin Sheff.

While Baa corporate spreads have narrowed sharply from their Armageddon highs (and perhaps vulnerable near-term to a healthy pullback in risk appetite), at 370bps, they are still pricing in a very bad economic and financial market scenario. Moreover, this yield spread is still wider than at any point during the 2001 or 1990 recessions or the 1998 LTCM/Russian debt default freeze-up. In fact, history suggests that the corporate default rate would have to rise well above 7% for corporate bonds to deliver negative returns with yields as high as they are at around 7¼%. In a -1¼% inflation rate world, this is a hefty 8½% real rate for investors to chew on. Not too shabby. The comparable yield in the U.S. equity market, depending on whether one uses reported or operating P/E multiples on forward or trailing earnings, is a little more than 6½%.

That puts the yield gap between corporate bonds and equities at 200bps. Here at Notes we’re extremely shy of equities right now. In our view corporate bonds are much better bet. As Rosie puts it, “In a nutshell, investment-grade corporate bonds offer some degree of cyclicality (though risk is involved) along with the benefit of capturing a decent yield that is tough to come by these days.”