Bubble Bursting Order

When will the stock market bubble burst? 

I don't know, nor does anyone else. But I suspect the junk bond market is likely to go first.

Bloomberg reports U.S. Junk Bond Yields Hit Record Low as Vaccine Hope Fuels Rally

The average yield for the Bloomberg Barclays U.S. corporate high yield index plummeted to 4.56%, sinking below the previous record of 4.83% set in June 2014. The 45 basis point decline from Friday’s close was the steepest fall since April 9, when the Federal Reserve expanded its corporate bond purchases to include some junk debt.

Investors are still pouring money back into retail funds that buy junk-rated debt with an estimated inflow of $3.23 billion by Friday’s close, JPMorgan Chase & Co. analysts wrote in a note, citing Refinitiv Lipper. The cash influx was led by HYG, the biggest high yield exchange-traded fund, with net incoming cash of almost $1.9 billion. JNK, the second biggest ETF, raked in $511 million.

Observation

Vaccine news is hopeful, but long-term cash flows haven't suddenly jumped beyond where they were pre-SARS-CoV-2. This is easily the worst passive investment menu in U.S. history.

Reminder

Mish

Junk Bond Bubble in Pictures: Deflation Up Next

The widely discussed "everything bubble" is, in reality, a corporate junk bond bubble on steroids sponsored by the Fed.

Junk Bond Bubble in Six Images

The junk bond to BBB-rated bond spread and the spread between AAA to BBB bonds shows amazing complacency. It won't last.

Tracking the Amazing Junk Bond Bubbles in the US and Europe

In response to Bubblicious Debate: Greenspan Says “Bond Bubble About to Break”, No Stock Market Bubble, reader AC wants to know how to track it.

World’s Biggest Ever Junk Bond Bubble in Pictures: What Hath Draghi Wrought?

In regards to ECB QE bond purchases, inquiring minds may be asking: What hath ECB president Mario Draghi wrought?

Man Who Says "Bubbles Only Identified When They Burst" Detects Bubbles

Alan Greenspan is on a bubble-announcing campaign. He can see them now, but he couldn't see them then.

San Francisco Fed President: "No Signs Bubble About to Burst"

San Francisco Fed President John Williams cannot spot any bubbles. He wants gradual hikes.

Fed Tightening Cycles Coincide With Bursting of Asset Bubbles: How to Play It

Fed tightening has been a reliable catalyst for the bursting of asset bubbles globally, says Crescat Capital.

Mutual Fund Whale Goes "All In" On Junk Bonds

A mutual fund whale likes to time the junk bond market. The whale is back to "all in" via ETFs.