Ken Fisher is chairman of Fisher Wealth Management, and a long standing Forbes Magazine columnist.

In the media, it’s all subprime, all the time. Headlines claim a credit crunch will sink shares, spike interest rates and tank the economy. As evidence, it highlights soon-to-be bankrupt subprime lenders and a handful of failing hedge funds.

Don’t buy it! Gloomy anecdotes sell newspapers, but don’t signal systemic failure. If subprime were rippling into a systemic disaster, we’d see it in vastly widening credit spreads. Yet, credit spreads today - the difference between high quality debt and low quality debt of the same maturity - are up but, are nowhere near levels necessary for a credit crunch.

Despite recent spread volatility, even the largest moves are relatively small - 10 and 20 basis points per day - compared with the massive early-stage spikes seen in history’s true credit crises. Conveniently, those sharp spikes usually preceded, though not always, the subsequent stockmarket meltdown.

Spreads will tell you

Take 1998’s front half. The spread between corporate junk and US government intermediates bounced around 3.5%. Then, Long Term Capital Management (a £2.3 billion US hedge fund) infamously imploded, sparking fears that the entire finance sector was doomed. But credit spreads warned you, spiking all summer to nearly 7%. US shares corrected a bile-inducing 20%. But both the spike and correction were short-lived, spreads narrowed and shares recovered, returning 29% in 1998 and 21% in 1999. The trouble was temporary - spreads told you.

Spreads warned again in 2000, as tech imploded. But the broader market didn’t seriously begin slipping until 2001, after spreads signalled trouble all 2000 - spiking from 4% to 8.5% by year-end. The message was much more massive than in 1998, but this was no short-lived spike. Spreads lurched between 6.5% and 8.5% during 2001, while shares grinded down. Then, spreads even signaled a brief relief-narrowing below 5% after 11 September as recession ended and shares rallied.

But if you were lulled, widening spreads warned again, spiking mid-2002 into a bumpy plateau, sending shares into a soul-crushing double-bottom. Then, spreads briskly narrowed all 2003, in time for global shares to return 33%. Just watching the spreads told you!

Trouble ahead? Not

What about today? A true credit crisis must have vast widening credit spreads. At 4.3%, spreads are up markedly from January’s 3.3, but where they were in mid-2005 and 2003 when the bull market began. For a real dilemma, we are going to need to see spreads widen another several per cent.

Headlines suggest more trouble ahead… So what? There’s always some marginal troubled area in an otherwise healthy, galloping market. Someone’s always going bankrupt - why not subprime? And a handful of failing hedge funds tells you nothing (except perhaps that those hedge funds were lousy risk-hedgers). You know the problem isn’t threatening the market and economy by the spreads.

But what if crisis is real? Spreads will tell you! If they sharply widen, by several percentage points, watch out. Until then, bet against those bears - they’ve been wrong all year and they’re wrong now. Subprime’s just one more meaningless headline telling you there’s nothing much economically negative to report  (see my last column Sell Journalists, Buy the Market). The global economy’s galloping, earnings are strong and the share supply is shrinking all under-appreciated good news. The more the media frets about imaginary meltdowns, the better. Fear of a false factor is always bullish when the outcome isn’t what those credit cowards fear, the positive surprise will drive shares higher.

So fight silly fears with shares like these: celebrate with Constellation Brands (STZ), the world’s largest winemaker, producing a bevy of alcoholic beverages - beer, wine, and liquor - at diversified price points. It’s had nice growth and healthy margins, but sells at only 15 times 2008 earnings and 1.1 times revenue. The CEO had better get his price up, or someone else will do it for him. Either way, you profit.

Amdocs (DOX), incorporated in the Channel Islands has a big multinational reach. The company provides software and services to big telephone companies, enabling customer-relationship management, orders, billing, and so on. It turned a tasty profit over the past 12 months and should continue growing rapidly. At 16 times 2008 earnings, it looks cheap. Take advantage now.

(In this article we’re considering the spreads between 7-10 year US Treasuries and corporate high yields).