Good Morning, Good Morning, Good Morning!

Today, fixed income investors received a few wake up calls. Whether they were listening is another matter.

The calls and e-mails keep pouring in asking if investors should participate in the GM exchange offer to swap their senior debt for common equity. I have my own opinions about going lower on the capital structure (don't do it), but it is a moot point with the GM exchange. It is not going to happen. To avoid bankruptcy, GM would need 90% investor participation in the exchange. No 90% and no one gets exchanged. Why won't most GM bondholders exchange their debt for equity? Because in a bankruptcy (if the rule of law still means anything in this country), GM creditors are entitled to much more than a 10% ownership stake.

I am not the only one who believes that a GM bankruptcy is likely. GM CEO Fritz Henderson also believes that a GM bankruptcy is inevitable. Since, unlike with Chrysler, most GM bondholders are not TARP banks, President Obama may not be able to pressure creditors into committing economic suicide.

Last week there was much euphoria on Wall Street because initial jobless claims fell. Well they're up again. Sorry boys and girls, real estate values continue to decline. Companies continue to pare workers. Retail sales are not stellar and could get worse as the beneficial effects of tax refunds wain. Better earnings among retailers have been mostly due to cost cutting. That an only go so far.

What about inflation? Optimists are quick to point out that deflation is only really occurring in food, energy and real estate. Today's PPI report bears that out. However, those were the only sectors experience consistent inflation during the last economic expansion.

I am not an equity strategist, but with few tools left to stimulate growth and consumer spending to levels seen during the two decades of falling rates beginning 1982 (can't make borrowing rates and standards lower), I think returns in the stock market over the next 1o years will have difficulty outperforming the current 10-year yield of 3.10%. That's no bull.