ETF.com: What's your view on oil? We're at $45-50 for WTI now. What do you think about 2015 and beyond?
Bernstein: We don't forecast oil prices, per se. But it's a little disconcerting to us that everybody's looking for a quick bounce in the energy sector, under the suspicion that this is just a temporary retracement in energy prices. We think this is akin to the way people were talking about technology stocks in the summer of 2000, when technology stocks' prices fell quite dramatically and everybody said, "Oh, it's just temporary and you should buy them now." Well, that didn't quite work out.
That's kind of what it sounds like today, where everybody is rushing to either buy the stocks or, in many cases, buy the debt of some of these companies. We still think there's much more risk than people think.
ETF.com: On the credit side of the equation, high-yield bond issuers within the oil patch have definitely taken it on the chin. Do you see that as an isolated event that's related to energy frothiness? Or do you see it as part of a larger credit bubble?
Bernstein: I don't think it's a credit bubble overall within the entire economy, but certainly within the energy sector, credit was pretty free flowing. A couple of years ago, we were joking in the presentations we used to give. We'd say, "Well, all you have to do is walk into a bank these days and whisper the word 'fracking' and they would throw money at you." That was two or three years ago.
That's what was going on, and that took place in the high-yield bond market. So, what you're seeing is a reassessment of the credit risk of the companies within the energy sector. That's only natural to see that. Spreads probably got way too narrow. They're going to normalize in one form or another.