Maybe it's just that debt market participants are slow and stock market players are retarded (in the French sense).
From a January 2009 post referencing a Dec. 2008 comment:
Is the Stock Market a LAGGING Indicator?
In early December I had a comment at MarketBeat (which we reprised the next week in "Fears of a million layoffs a month in corporate America"):
The most amazing thing about the reaction of equity market participants has been how slow-motion the reaction has been.Anybody who was paying attention would have been forewarned by the "Quant Crash" on August 15, 2007, plenty of lead-time before the market hit its all-time high seven weeks later.
In this day and age, where hedgies and primes factor in geographic distance to shave a couple nanoseconds on execution time, the response to credit market distress, starting in Aug. ‘07 and disseminated to the public at MarketBeat and via other platforms, has been glacial.
With that in mind we’re probably looking at a “Happy Days are Here Again” rally that will be just long enough to suck the sideline dollars in, followed by a depressive “We’re screwed, the economy is worse than we ever thought” final decline of this cyclical bear.
Unfortunately we’ve got another 7-10 years of secular bear. To quote myself (and Warren)...
Here's the Wall Street Journal Europe's The Source blog:
The Italian Bond Job
Why has it taken so long for the markets to wake up to Italian risks?
While the monstrosities that are the Greek, Irish and Portuguese economies have been laid low by global bond vigilantes, the Italian ogre has until recently managed to hide behind a sapling. No longer.
Bond investors are demanding a hefty risk premium for holding Italian debt; yields on 10-year government bonds have hit a record 5.4% for a spread of 2.64 percentage points above equivalent German debt.
Investors are only just starting to see the obvious. The Italian government debt is 120% of GDP. History shows that above 80% tends to be unstable, often leading to default.June 27
Of course, economies have been known to grow their way out of big debt loads. But the Italian economy has been stagnant for the past decade. Productivity is negative and the Italian economy is about a third less competitive than Germany’s. As long as Italy is in the euro zone and Germany insists on a low domestic inflation rate, the only route Italy has back to competitiveness is the same as the one being faced by the rest of Europe’s periphery, through deflation....MORE
Is The Big Money Looking for a Credit Anstalt in Italy? (GS; JPM)
Credit Anstalt All Over Again "UniCredit Stock Halted After Plunge As Fresh Wave Of Italian Fears Emerges"
Since that first post Unicredit is down 30%. That's a bad couple weeks.