Corporate Bond & Junk Bond Markets Driven into Foaming-at-the-Mouth Exuberance by Fed Jawboning about Huge Purchases. But it Actually Bought Just Tiny Amounts

Here are the details on its purchases and holdings in July.

By Wolf Richter for WOLF STREET.

The Fed disclosed yesterday afternoon the amounts and names of the corporate bonds and corporate bond-ETFs that it bought in July. The Fed started buying corporate bonds for the first time ever in June, after having started buying bond-ETFs in May. The amounts are small – measured in millions and single-digit billions – and disappear as rounding errors on the Fed’s overall balance sheet measured in hundreds of billions and trillions.

Corporate bond purchases and holdings.

Over the month of July, the Fed purchased $1.8 billion in corporate bonds. This brought its total holdings of corporate bonds at the end of July to $3.55 billion. Of these holdings, 2.9% were BB-rated junk bonds, or about $110 million (with an M). The rest were investment-grade: 41.8% rated A, AA, or AAA; and 55.3% rated BBB.

The Fed spread these bond purchases in July over hundreds of companies in 753 small individual trades, with most trades amounting to the low single-digit-million dollars.

The largest trades – and the only three trades in the double-digit-million dollars – were a Pfizer bond purchase of $10 million, a CVS Health Corp bond purchase of $12 million, and an AT&T bond purchase of $10 million.

For example, it bought $33 million of Apple bonds in July, spread over 8 trades, on four different trading days, involving six different bond issues (six different CUSIP numbers):

Company CUSIP Number
Trade Date Amount
Apple Inc 037833AK6 07/01/2020 $2,124,240
Apple Inc 037833AR1 07/01/2020 $7,186,970
Apple Inc 037833BS8 07/01/2020 $2,039,445
Apple Inc 037833DV9 07/01/2020 $4,047,263
Apple Inc 037833DL1 07/10/2020 $3,110,275
Apple Inc 037833AK6 07/13/2020 $4,242,760
Apple Inc 037833CG3 07/13/2020 $4,384,360
Apple Inc 037833DV9 07/20/2020 $4,049,837

Which rases the question: Why does the Fed buy any Apple bonds? Apple has zero problems issuing bonds at near-Treasury yields. For example, its 2.4% 10-year notes due in May 2023 (therefore trading like less-than-two-year notes) last traded with a yield of 0.39%. Why does the Fed buy any corporate bonds, period?

That was a rhetorical question. The Fed does whatever it does to widen the wealth disparity to the maximum extent possible. That has been its guiding principle, and with great success.

Nevertheless, it hasn’t bought much. Just going through the motions. Its verbiage alone was enough to trigger a breath-taking corporate bond market rally.

The companies range across the spectrum, from cigarette-maker Altria to medial device company Zimmer Biomet Holding. The Fed’s holdings are spread over the 12 bond market sectors. Note that its largest sector holdings (consumer non-cyclical) amounts to just $680 million; and its smallest sector holdings (non-bank/insurance financials) amounts to just $68 million:

Broad Market Index Sector Par Value  % of total
Consumer Non-Cyclical $680,000,000 20.3%
Consumer Cyclical $544,500,000 16.3%
Utilities $345,000,000 10.3%
Energy $316,000,000 9.4%
Technology $310,000,000 9.3%
Insurance $271,000,000 8.1%
Communications $259,500,000 7.8%
Capital Goods $248,000,000 7.4%
Basic Industry $120,500,000 3.6%
REITs $99,000,000 3.0%
Transportation $87,000,000 2.6%
Non-Bank/Insurance Financials $68,500,000 2.1%
Total $3,349,000,000 100%

The bond purchases include the US entities of foreign companies, including a slew of finance entities of German, Japanese, and Korean automakers, such as these:

  • Volkswagen Group of America Finance LLC: $34 million in eight trades;
  • Toyota Motor Credit Corp: $32 million in 8 trades;
  • Daimler Finance North America LLC: $38 million in 12 trades
  • BMW US Capital LLC: $30 million in 9 trades

Among the junk-rated bonds the Fed bought in July are:

  • $5.6 million of Ford Motor Company bonds, in two trades;
  • $13 million of Sabine Pass Liquefaction bonds, in five trades.

Moody’s rates both of them Ba2, which is two notches into high-yield (here is my cheat sheet for corporate credit ratings by ratings agency)

Bond ETF purchases and holdings.

Over the month of July, the Fed bought just $520 million in bond ETFs, bringing its total holdings of bond-ETFs at the end of July to $8.7 billion, spread over 16 ETFs, including small holdings of high-yield ETFs, including just $331 million of HYG.

Ticker Fund Name # of Shares
Total holdings, market value, on July 31
ANGL VanEck Vectors Fallen Angel High Yield Bond ETF 1,129,770 $34,616,153
HYG iShares iBoxx High Yield Corporate Bond ETF 3,875,790 $330,953,708
HYLB Xtrackers US Dollar High Yield Corporate Bond ETF 1,644,970 $80,504,832
IGIB iShares Intermediate-Term Corporate Bond ETF 8,046,720 $493,988,141
IGSB iShares Short-Term Corporate Bond ETF 12,448,466 $685,288,053
JNK SPDR Bloomberg Barclays High Yield Bond ETF 5,285,048 $560,743,593
LQD iShares iBoxx US Dollar Investment Grade Corporate Bond ETF 17,860,663 $2,471,022,726
SHYG iShares 0-5 Year High Yield Corporate Bond ETF 685,850 $30,472,316
SJNK SPDR Bloomberg Barclays Short Term High Yield Bond ETF 1,220,506 $31,794,181
SLQD iShares 0-5 Year Investment Grade Corporate Bond ETF 841,975 $44,026,873
SPIB SPDR Portfolio Intermediate Term Corporate Bond ETF 13,181,447 $486,922,652
SPSB SPDR Portfolio Short Term Corporate Bond ETF 8,954,460 $281,438,678
USHY iShares Broad US Dollar High Yield Corporate Bond ETF 1,555,865 $62,281,276
USIG iShares Broad US Dollar Investment Grade Corporate Bond ETF 2,997,120 $185,821,440
VCIT Vanguard Intermediate-Term Corporate Bond ETF 14,875,069 $1,440,352,931
VCSH Vanguard Short-Term Corporate Bond ETF 18,237,015 $1,515,495,947
Total $8,735,723,499

How does this square with the SPVs on the Fed’s balance sheet?

On its balance sheet, the Fed shows $44 billion in its “Corporate Credit Facility” Special Purpose Vehicle, which is the SPV where these corporate bond and bond-ETFs are held.

But as we’ve seen above, at the end of July, the Fed held only $8.74 billion in corporate bond ETFs and $3.55 billion in corporate bonds, for a total of $12.3 billion.

And the remaining $32 billion ($44 billion – $12 billion) in the SPV on the balance sheet? Nearly all of it is the unused portion of “equity investment” from the Treasury Department. The Treasury’s total equity investment was $37.5 billion. It just sits there.

So given all the hoopla surrounding the Fed’s jawboning about massive huge breath-taking purchases of corporate bonds and bond ETFs, this is pocket change — $12 billion in total. But the hoopla was enough to drive the bond market, including the junk-bond market, into foaming-at-the-mouth exuberance that continues to this day.

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  74 comments for “Corporate Bond & Junk Bond Markets Driven into Foaming-at-the-Mouth Exuberance by Fed Jawboning about Huge Purchases. But it Actually Bought Just Tiny Amounts

  1. Sporkfed says:

    It’s like Penn And Teller are running the Fed.

    • Old School says:

      I would like to see some of the smartest financial people that don’t agree with Fed policy to get some air time and make their case how the Fed is undermining the real economy. Stockman, Gunlach, Hussman and a few more are perfectly able to go toe to toe with them on why the Fed policies are failing the USA.

  2. Gandalf says:

    We are all MMT’ers now

    • Saltcreep says:

      It’s getting there… Like that Monty Python scene from Life of Brian, where Brian declares ‘You are all individuals’, and everyone accedes through repetition, except for one guy who pipes up and says ‘I’m not’.

  3. Skara says:

    Wolf,

    The market seems to process all news as good news and just melts up and up.

    Aside from another black swan event, what would it take to trigger a correction at this point, since all news seems to be good news?

    • Andrei says:

      News don’t drive the market for long time. Just check the 9/11 for an example. It is collective psychology that does.

      • Skara says:

        Fair point. So what might break the collective delusion markets are under right now…at least that’s how I see it?

        • DeerInHeadlights says:

          A second wave of lockdowns. Everyone thinks it won’t happen again but I think with cold weather, the spread of the virus can escalate drastically. There will be no option at that time but to lock down hard.

          The market hasn’t priced that in.

        • timbers says:

          Ending QE and ZIRP. Until these are terminated, there will always be only/mostly good news, collective delusion, or anything else you might call it. Everything else is just parcing data for more granular information.

        • Andrei says:

          Gradual social mood change. When currently prevailing optimism – that everything is returning to normal – vanes, watch out below. The 3rd wave can really be in the offing.

        • Rowen says:

          If the thesis is that bored retail money is flooding the SP500 and FANGs, driving those indices to absurd heights, then counter-intuitively a full reopening the economy would drain money from equities.

          Tons of old people like my mom’s neighbors who used to drain 30-70K/year from stocks to pay their retirement lifestyles not doing much of anything these days, other than Facetiming the grandkids.

        • apm says:

          Is it actually a “delusion”?! It probably takes allowing companies to actually fail and wipe out investors and execs money. As if each time a company gets into trouble it gets bailed out, then it is kind of the “rational” thing to do, to not care about taking excessive risks, as it works out just fine for those making the decisions.

          And if letting companies fail or restructure through chapter 11 has too many negative impacts on others, perhaps one could require every time a company gets a bailout, it may not pay any bonuses to the c-suit and not be allowed to pay out any dividends or do any stock buy backs until all of the bailout has been fully payed off. That way the people actually making the decisions. Investors and c-suit also have personal negative consequences of their decisions, not just the workers who get fired for cost cutting purposes. Maybe then things would become a little more risk averse.

        • Lee says:

          “A second wave of lockdowns.”

          Well Melbourne is in its second lockdown and the restricitons and bs going on here are ridiculous.

          A curfew from 8:00pm to 5:00am, workplaces shut, restricted travel withing 5 kilometers of your home, and shopping limited to one hour a day for one person from each household and only one hour of exercise a day (Now how in the world are they even going to be able to enforce something lije that? Are they going to have a cop with a stopwatch sitting outside homes?)

          “Police have issued 202 fines to Victorians caught breaching COVID-19 restrictions in the past 24 hours, including to a man who told police he was trying to escape his housemate’s noisy bedroom antics.”

          So why the 5 kilometer restriction and not 5.5 or 3.2? And why 8:00pm instead of 7:30pm or 9:15pm? And why one hour of shopping or exercise?

          And speaking of bonds:

          “Sydney Airport has announced it will raise $2 billion in fresh capital to firm up its pandemic-stressed balance sheet after revealing a $53 million loss for the six months to June 30.”

          Airport traffic was down 94.9% for June 2020 compared to June 2019.

          Australia is basically closed to the outside world and 25% of the population is locked down and can’t visit another state in the country let alone another city in the state.

          NZ just shut Auckland down for three days as a result of a whopping total of 4 cases of the virus………………

          So no travel between OZ and NZ for the rest of the year either which is why the 3rd, 4th, 9th, and 13th biggest gainers in the ASX 200 were travel companies yesterday!!

          Makes one wonder what is going on in peoples’ minds, if anything.

        • RightNYer says:

          apm, in my opinion, a better solution would be for any bailouts to include penny warrants. If a government grant actually diluted existing equity, it would hurt enough that execs would be incentivized to not count on it as a backup.

        • Happy1 says:

          @Deerinheadlights

          The odds of multi month shut downs as experienced this spring are zero. Yes, there will probably be more virus when school starts and it’s colder. The costs of shut down are far to high to repeat.

        • DeerInHeadlights says:

          Happy1,

          I would not count lock-downs out. It’s the only thing that actually works, despite how harsh and impactful it is. Isolation and quarantine are measures humanity has taken for millennia when it comes to disease outbreaks. I understand that there’s every reason for the current administration to not do it at least before the elections but what about after? What about a different administration? Also, at least two regional Fed presidents have come out in recent days and insisted on hard lock-downs as a way to get control of the virus spread. If you read between the lines, what they’re saying is that any further monetary assistance will be conditional upon authorities taking decisive and drastic steps, such as lock-downs.

          I guess we’ll find out in the coming months.

    • Old School says:

      A balanced 60/40 fund has always been a pretty good no brainer that was about as good of a long term risk adjusted portfolio as there was. In real terms that yields zero now. It’s just another indicator that Feds go to move was to inflate asset values or you might say to bring the 2030 – 2035 asset value to today.

      It will pop when people prefer cash to the fear of losing money which feeds on itself when the selling begins. They were able to stop it in March, but next time might be different.

  4. mb says:

    Apple: maybe the question is, from whom the Fed is buying the bonds? Does somebody need to reduce a book?

  5. Did they buy any Kodak bonds?

    • Rowen says:

      Or silver?

      • MCH says:

        Better question is if the Fed bought silver, did it unwind silver in the early part of the day.

        So weird all of these actions that has the sole purpose of propping up the stock market.

    • Skara says:

      😂😂😂

    • Wolf Richter says:

      No. Kodak is rated CCC, way below the Fed’s threshold.

      • monday1929 says:

        Wolf, isn’t there CCC in HYG?
        You do realize the Fed ‘s Threat to buy Junk works for now, but they will go full tilt soon, when needed.
        I Always believe “news” does not drive markets, but do believe if schools get hit over next several weeks with covid, it will accompany repeat of Spring covid crash.
        The inability of students to attend school is a major, not-discounted event with, one would assume, at least a 50% probability of occurring.

        • Wolf Richter says:

          Yes, the Fed owns $331 million (with an M) of HYG, in total. In a pile of $6.9 Trillion (with a T) in assets. And so the Fed is exposed indirectly to any CCC bonds in HYG. But even if HYG goes to Zero, the Fed’s holdings of HYG are so small that it won’t matter.

        • monday1929 says:

          Appreciate the reply Wolf. This is where I keep losing you, or you me. I believe they have half a Trillion in reserve specifically to bail out Junk Bonds. It is backstopped by the taxpayer. They are paying Blackrock to conduct the bailout of Blackrock’s OWN junk Bond funds. A no bid contract. The FED, at least for now, is 100% back-stopping the Junk Bond market, and they do not intend to let their friends get wiped out. imho.

  6. NARmageddon says:

    Interesting timing that this article was published today. UST10YR yield (TNX) spiked today.

    I rotated out of some (long) VCLT and into some (intermediate) VCIT corporate bond ETF. It would have been considerably better to sell 1-3 days ago and to buy today.

    I guess now the Fed is going to get on deck and ruin it for me.

    • Andrei says:

      this probably triggered cable and fiber plunge today

    • The bank stocks were solid today, perhaps the Fed is going to take care of their own. Maybe they got the message, stop punishing the yield curve. The one obvious benefit of buying a dribbling of corporates is the income they make. One thing that will get the bond vigilantes our their cave is the presupposition that Fed is a surrogate junk bond fund. Just wait for the downgrades.

    • sunny129 says:

      Short term Corp bonds are ‘safer’ bet – VCSH, SPIB, IGSB++

      I read the article yesterday PM at Marketwatch and started reducing my positions away from long and intermediate. Be aware that even high grade Corp bond ETFs like LQD contain over 50% to JNK bonds! And the corporate debt is over 50% of it’s collateral assets. The BOMB of CMBS (reits. office. mall++) is ticking

      • RightNYer says:

        A lot of commercial real estate is going to drop in value drastically right away (if it hasn’t already), and CMBS paper is generally 10 year, so the effects will be staggered, depending on when the bonds and underlying mortgages matures. We all know many of these sponsors will go into maturity default when they can’t get new financing for the balloon payment.

        • Mr Wake Up says:

          Right(NY)er – if the parentheses within the handle is an indication regarding such market then yes – it has your’e just not going to get that on the evening news tonight….

          A drive through midtown Manhattan is a clear indication that the city that never sleeps is not on vacation nor hibernation.

          70% of office buildings are empty not vacant huge difference vacant as in work from home or another state…

          The street traffic dependent business off that 70% work force presence is decimating the local economy.

          Commercial buyers are right now
          a) kicking tires
          b) looking for blood
          c) not interested at all

          Nor like Gov Cuomo said – rich friends of his are in the Hamptons, upstate, CT – yes they are but what hes not mentioning are the ones who fled the state! They warns they might stay out there they don’t pay city taxes – duh how about living in FL they dont pay state taxes either buddy…

          I breaks my heart to repeat this over and over but
          The capital of capitalism is dead my friend….

        • RightNYer says:

          Mr Wake Up – Haha yes, grew up in New York, but fled to Florida years ago, for the weather, politics, and taxes. I haven’t been to New York since the pandemic started, but I can only imagine what the situation in midtown looks like. That’s the part people didn’t understand about work from home disruption. It not only affects commercial real estate, but jobs for dry cleaners, coffee shops, lunch spots, and everything else.

          Anyone who thinks our economy will be back to February levels by the end of 2020 is simply not a serious person.

        • Mr Wake Up says:

          Yeah man no way. That’s all keep your money in the market speach.

          Plus in addition to Covid the political situation is deteriorating at rapid fire pace!

          Smart man for heading south. I heard and seen all the warning signs but kept cashing those checks couldn’t resist like Morrison said breaking through to the other side…

          Maybe I’m the one who’s needs to “wake up”

      • Implicit says:

        The REIT ETF ticker IYR has been weaker than the rest of the ballooning stock market for the past few weeks, and today was one of the first stocks to turn down.

  7. US FED buying bonds in multinational companies is so European. Doug Noland referred to the FED as the Global Lender of Last Resort, but ECB is already buying this stuff, and China is lending money to Turkey. (FED cut off their dollar swap line). Global economic policy is most coordinated during times of stress, and IMF can be in two places at once. The Fed put in token buy orders. Timid first moves. Now if Fed were to let spreads widen enough so that all new Treasury paper would sell at auction they could keep their balance sheet in some order. We are very close to a lame duck executive branch. Would Fed do the right thing?

  8. MonkeyBusiness says:

    Everything going down today. Here comes a correction!!!

    • DeerInHeadlights says:

      Inevitable when stimulus stalled and there didn’t look like any way forward. How big of a correction this will be remains to be seen. I don’t think this is the “one”, i.e. Wolf might not cover his shorts just yet. :)

    • sunny129 says:

      The news of ‘No more EASY-PEASY monry’ spigot from Fed brought the mkts down in the last Hour! This whole mkt is built on DEBT since March of ’09!

  9. I guess the Fed members decided that to illegally buy junk bonds they had better err on the side of minuscule numbers so if any of this was later prosecuted by the Maddening Crowd they would only get 3 to 5 years in a minimum security prison. Wolf could run for President for pulling the curtain back and revealing for all to see that the Wizard of Money was just a little bald guy pulling a bunch of levels to make himself seem Omnipotent. Under SEC regulations, even jawboning is market manipulation and we need Powell and all Chairs since and including Greenspan to walk the plank. Now say after me: “NO ONE IS ABOVE THE LAW.” NEVER HAVE SO FEW UN-ELECTED OFFICIALS DONE SO MUCH HARM TO SO MANY. We need the Chicago gangsters to visit the Fed building next!

    • Wolf Richter says:

      David W. Young,

      It’s fascinating, isn’t it, that market manipulation is in the official toolbox of the Fed. That’s what it does by definition. That’s precisely what the “transmission channels” — a more palatable term — for its interest rate policies are. And that’s precisely what it wants to accomplish with its bond purchases.

      • Q says:

        Are you intending to cut loss on your shorts? Seems like the market is just trending up and up. The bad news don’t seem to be pushing the market down at all.

  10. Lou Mannheim says:

    “ That was a rhetorical question. The Fed does whatever it does to widen the wealth disparity to the maximum extent possible. That has been its guiding principle, and with great success.”

    When they write the book on this odd period of time I hope there’s a word thrown in for the risk-averse among us. It’s been 40 years of this nonsense.

  11. nick kelly says:

    S &P nears record.

    Things are going so well with the virus and resulting ‘stimulus’ if it disappeared we’d need a new one.

    And my non-sarc comment: the Federal Govt is investing in a cigarette maker???

  12. TimTim says:

    Hi

    To quote from above:

    ‘The Fed does whatever it does to widen the wealth disparity to the maximum extent possible.’

    From an observational standpoint of one, I think that is probably unlikely that is a base principle for their actions. It is, however, for the better economically infomed than I to tell whether that is the outcome of their actions.

    But it doesn’t really matter either way. If they had confidence in more companies, the numbers should be a lot larger perhaps.

    Perhaps what we are actually seeing is short term action in the face of growing panic. Acting to be seen to be acting when, perhaps again, they’ve actually given up for the time being. Just shoring up proxies for political relationships.

    Don’t know, answers on a postcard.

  13. Skara says:

    So what are the chances now that the FED has made their friends money with the 50% run up in the market they now do it in reverse? Banks need trading income in this environment to beat earnings estimates, and its not like the S&P is going to rise another 50% in four months, so now they do it in reverse? Or perhaps after the election?

  14. Jdog says:

    The belief in the Fed has become a cult, unfortunately, it is a cult that incorporates much of Wall St.
    At some point reality will assert itself and the truth that a stock is only worth a small multiple of earnings, and a bond is only as good as the solvency of the entity issuing it, will become apparent even to millennial’s.
    When that day comes, the Fed will be helpless to stop the panic, and the value of assets will revert to their long term mean.

  15. andy says:

    Now imagine the level of FOMO when the Fed buys few shares of Apple, or Boeing.

    • Wolf Richter says:

      Powell removed that possibility during the press conference.

      • MonkeyBusiness says:

        And we should believe it? Let’s say they do a secret SPV to support the stock market, even if they got caught later,do you sincerely believe anyone will prosecute these guys?

        The BLS is obviously fudging data, so why can’t the Fed do their own fudging?

        • Wolf Richter says:

          MonkeyBusiness,

          The Fed is hugely into jawboning, as you can see. Why would it do anything secretly? That would destroy the purpose. It could just announce that it would buy $10 gazillion of stocks, and the market would instantly double. Then it wouldn’t have to jump through all the hoops of actually buying anything.

          Besides, you can easily fudge survey data, such as the BLS collects. But not securities ownership. Securities are just electronic entries that are registered, and it is known who holds them, such as for dividend or interest distributions, which are sent automatically to holders at that moment in time. The whole system is set up to know who holds what at a specific moment in time. That’s how online trades are possible. Trying to buy large amounts of stocks secretly without anyone, and I mean ANYONE, knowing about it, ever, in this system … I don’t think so.

      • sunny129 says:

        Isn’t Fed buying now individual bonds than bond etfs? Doesn’t include bonds issued by various mega companbies include Apple, MSFT and even Boeing +++? This is indirectly supporting Equity mkt via the Corp credit mkt?

        Fed has already crossed many red lines under 13.3 SPV . One more doesn’t make any difference! They have lost the credibility and also their integrity, especially in NOT owning up to their responsibility in creating wealth & income disparity in our society!

      • andy says:

        And they were rasing rates just some months ago. These people are not grounded in reality. Money is no object.

  16. Mad Dog says:

    The US today resembles the Austro-Hungarian Empire in 1914. We’re rotting from the inside out. All of our major institutions are corrupt. All virtue has been thrown out the window. This will not end well. Read Geoffrey Wawros’s excellent book “A Mad Catastrophe” about the outbreak of WWI and the collapse of the Habsburg Empire. Everything that happened one hundred years ago in Europe is repeating itself here in the USA today.

    • MonkeyBusiness says:

      And the Austro-Hungarian empire resembled some other older empire.

      Power corrupts. Absolute power corrupts absolutely.

      Small EVERYTHING is good. Big ANYTHING is bad. A person, a group, etc shouldn’t be able to influence anything beyond a city block radius.

    • VintageVNvet says:

      Not quite MD,
      Though there are similarities and there is some resemblance for sure, especially in the general incompetence of the current political class,,,
      ”Everything that happened one hundred years ago in Europe is repeating itself here in the USA today.”” is certainly not true and, in fact, cannot be true if for no other reason than the vast technological improvements in communication, data processing, medicine, etc., in the last 100 years.
      Suggest reading ”The Winter Soldier” by Daniel Mason, to get a more realistic feeling for how things were in that war for many people.

    • nick kelly says:

      It is common ground among historians that the AH empire was a second rate power before WWI. It only dared risk declaring war on Serbia (backed by Russia) because it had been told it had the backing of Germany, a first rate power.

      Whatever one’s opinions of the USA, it is a first rate power. It is not Austria- Hungary. (the alliance between these two, the result of Prussia under Bismarck kicking Austria out of the German nest, was so unstable internally that Austria pondered invading Hungary)

    • Petunia says:

      In general I agree with you. For a long time I’ve been thinking and saying we are a lot closer to 1932 than to 2032. I’m certain of it now. The chaos is everywhere and it will spread until it can’t continue, which is not in anyway a good thing.

    • Jdog says:

      The reason history often rimes, is that human nature never changes. Whenever humans are granted power over other humans, they will abuse it and use it to benefit themselves. Always.
      The USA was designed to strictly limit the powers of government for that very reason. In order for the people to be free and sovereign, the government had to be the servant of the people, and not their master.
      As the years went by, the US government became increasingly powerful until it has now become our master. The problem is we still have laws in the form of the Constitution which are direct contrast to what the government does on a daily basis. The government is losing its credibility both with its citizens, and internationally.
      We have become a nation of hypocrites, who do not follow our ideals, nor our own laws. Change is now inevitable, the question is what form that change will take. We are entering a time period where our very survival as a country will be tested, and the outcome is unclear.

      • VintageVNvet says:

        Good one jpup,,,
        and gotta agree almost totally; the exception being that IMO we are still in the state described by one of our leading 19th century guys, maybe Thoreau, who wrote, “The mass of men lead lives of quiet desperation.” or something like that; and, following that, it really seems to me that the mass of folks are like that, and not hypocrites, though I would certainly agree that our ”chattering” classes on all sides are exactly that, and increasingly meaningless to the masses of We the Peedons.
        Agree like, totally dude, with the following, ”Change is now inevitable, the question is what form that change will take. We are entering a time period where our very survival as a country will be tested, and the outcome is unclear.”

    • nick kelly says:

      Your mention of 1914 should alert you to this fact: the AH Empire did not fall from internal corruption. It did not just disintegrate it was disintegrated, it was defeated in war. The same war that ended the German regime (militarized but not corrupt) the Russian regime and the Ottoman regime.
      If you wish to make a parallel argument you will have to posit a war with the US losing.

      • char says:

        When was the last time the US won a war? The US is not good at fighting wars whatever it thinks of itself.

  17. joe2 says:

    All I know is that when I’m sure it is time to make a move and buy or sell – – I’m wrong.

    In the short term. Long term remains to be seen.

  18. Mad Dog says:

    VintageVNvet

    I have issues with your statement:

    “is certainly not true and, in fact, cannot be true if for no other reason than the vast technological improvements in communication, data processing”

    All these technological improvements cannot change the fundamental issues which plagued the Austria Hungarian empire ( I can list a dozen) and the USA today, and a case can be made that they have made some of the problems worse. Like the obsession with social media and the offloading of tasks to people for no benefit to them using the new technology, spying on people, invading privacy, etc. Technology may have improved productivity and efficiency but has not changed the character of our leaders and the people who were conned into voting them in. The American people need to take a look in the mirror, We are going down the same path as Austria Hungary. Read Jeffrey’s book.

    End of Story.

  19. Robert says:

    “Which rases the question: Why does the Fed buy any Apple bonds? Apple has zero problems issuing bonds at near-Treasury yields.”

    All this bond buying is another form of QE.

    1. Buying apple bonds tells the market Apple is a Fed protected company. It will never suffer financial distress and therefore you should buy the stock.

    2. Buying up a limited pool of high quality bonds pushes the rest of the market into higher yield bonds. Of course the Fed isn’t buying very much so right now this point is less relevant.

    3. Buying the bonds of large market cap companies pushes the stock market up as a whole up.

    The Fed is supporting the stock market, which has become its primary mandate. They succeeded, because the Dow Transportation index is telling you the recovery is here. Or, as many postulate and today’s long bond action will say -“the inflation is here”.

  20. Patrick says:

    I suspect the Fed, monetizing corporate bonds (and eventutually stock indexes) will remain a ‘cheap date’ compared to the mountains of thin air fiat needed to suppress yields on monumental Gov treasury debt issuance and an ever growing alphabet soup of MMT pork. The latter being substantially inflationary for the real economy.

    TL;DR – Bluy Gold and hard assets.

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