There is an important measurement that helps us to know that the Credit Crisis has a ways to go before anyone can say "it's over." The fat lady has not sung yet.

This measurement, called the Discount Rate Spread by the U.S. Federal Reserve, shows the difference between high-quality [AA] and low-quality (A2/P2) commercial paper lending rates.

When the credit crisis first broke, in August 2007, the Discount Rate Spread jumped dramatically, as fears of defaults led investors to believe credit vehicles from the less pristine issuers were less trustworthy than commonly thought.

Commercial paper was considered a safe market before the crisis, and is often held by money market funds. Ever since the credit crisis, such lenders are demanding a premium for taking on low-quality commerical paper, proving that we have elevated levels of mistrust in the commercial paper market.

In other words, fears of another credit meltdown are still affecting the financial system, and the credit crisis is not over. Elevated fears over low-quality commercial paper show that the financial system is still wrestling with fears of another meltdown. This is something that smart investors can't afford to ignore.

Who's Been Buying Microsoft (MSFT) AND Johnson & Johnson (JNJ)?

There are always insiders and money managers who buy or accumulate large amounts of a company's stock for various and sundry reasons.

Microsoft (Nasdaq:MSFT) and Johnson and Johnson (NYSE:JNJ) are now two of the most widely owned stocks by investment gurus according to the people at Gurufocus.com .

Sixteen popular and well-respected gurus, which includes mutual fund managers, investment advisors and analysts, now own MSFT. This in spite of the fact that the stock has dropped from $35.37 at the beginning of 2008 to a depressing low today of $23.19.

Microsoft has dropped its takeover offer to buy Yahoo (Nasdaq:YHOO) and has now been rumored to be buying San Francisco search company Powerset for over $100 million. Investors didn't seem to like this move one bit.

At the same time, we're told that 15 legendary investment gurus now own some JNJ, and in this case, the company and the stock is doing well.

"The sale of its wound care unit could benefit Johnson & Johnson, as the diversified health care products company looks to trim slow-growing units, a Leerink Swann & Co. analyst said Tuesday."

Analyst Rick Wise reaffirmed a "Market Perform" rating for the New Brunswick, N.J.-based company, citing the benefits of cutting slower-growth, low-margin business.

Earlier Tuesday, J&J said it received an offer for the unit, which had about $270 million in sales in 2007, from One Equity Partners. J&J had total revenue of just under $61.1 billion in 2007.

JNJ keeps on raising its dividend year after year after year. It currently pays $1.84 a year per share dividend for a yield of 2.9%. The company has a pipeline of health, skin care, and over-the-counter products as well as its lucrative baby care products.

If the credit crisis continues and stocks have further to fall, it's no wonder that low PE stocks like MSFT and JNJ are being accumulated by the old pros. JNJ sells at a forward PE of around 14, and MSFT is selling at a forward PE of just above 12. Both companies are sitting on huge hoards of cash.

Disclosure: Author holds a long position in MSFT

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Marc Courtenay

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