“Here’s when US equity and bond markets will change direction: when investors come to fear the next Fed-talk.”
They’d piled into the new “risk sharing RMBS bonds” issued by Fannie and Freddie. Wall Street provided 80% leverage. Buying frenzy ensued. But it didn’t last long.
Junk bond investors are running for the hills. But there are no hills.
The fundamental and largely invisible shift in Western economies from the markets to central management.
It was a very basic question: Have there been times when you did not have enough money to buy the food you or your family needed? In wealthy countries, the percentages should be small, and given all the money-printing, it should be zero, you’d think.
It fits the pattern of gratuitous bank enrichment perfectly. This time, the big beneficiaries of the Fed are foreign banks. An unintended consequence, with big impact on the “recovery.”
By now, this wondrous bull market constantly gets benchmarked against the dotcom bubble. It’s different this time, we’re told, even on NPR. But the wholesale destruction of financial assets has already started, one pocket at a time.
Bernanke doesn’t regret any of the Fed’s actions, he said, except not explaining them to the people. They “really don’t understand why we did what we did,” he said. But there are a few people who do understand.
The Fed prints $4 trillion and the national debt jumps $9 trillion in six years. We’re now in month 57 of the expansion, beyond the average 53 months – already on borrowed time. Now comes Professor Krugman proposing to “do something.”
Small investors are having fun in the stock market again, after years of sitting out the most phenomenal rally. They’re leveraging up their portfolios. Margin debt is spiking beautifully. Alas, spiking margin debt has a nasty habit of ending in a crash. In one painful chart.