All-Time Low Junk Bond Yield
#Winning https://t.co/lttgKu4LfW
— Danielle DiMartino Booth (@DiMartinoBooth) January 20, 2021
Hooray!?
Bloomberg writer Lisa Abramowicz notes “A new all-time low for U.S. junk bond yields, of 4.13%”.
Daniele DiMartino Booth, CEO & Chief Strategist, Quill Intelligence LLC, replied “#Winning” which triggered the key Q&A.
Is the Fed Worried?
In private, yes.
— Danielle DiMartino Booth (@DiMartinoBooth) January 20, 2021
Q: Isn’t the Fed “a wee bit nervous over some of the valuation metrics being double the 1929 levels? I’m asking for a friend.”
A: “In private, yes.“
Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America
DiMartino Booth is author of Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America.
After correctly predicting the housing crash of 2008 and quitting her high-ranking Wall Street job, Danielle DiMartino Booth was surprised to find herself recruited as an analyst at the Federal Reserve Bank of Dallas, one of the regional centers of our complicated and widely misunderstood Federal Reserve System. She was shocked to discover just how much tunnel vision, arrogance, liberal dogma, and abuse of power drove the core policies of the Fed.
DiMartino Booth found a cabal of unelected academics who made decisions without the slightest understanding of the real world, just a slavish devotion to their theoretical models. Over the next nine years, she and her boss, Richard Fisher, tried to speak up about the dangers of Fed policies such as quantitative easing and deeply depressed interest rates. But as she puts it, “In a world rendered unsafe by banks that were too big to fail, we came to understand that the Fed was simply too big to fight.”
There Are No Hawks on the Fed, Only Ostriches
On January 15, I commented There Are No Hawks on the Fed, Only Ostriches
Not to worry, “We’ll let the world know,” when we spot inflation says Powell who cannot see the big pink elephant standing right on the Fed’s table.
The Fed cannot see inflation because they do not understand it.
The immense asset bubbles in the stock market, housing market, and bond market, provide ample evidence of inflation.
Instead, the Fed and most economists view the CPI, a fatally flawed measure, as representative of inflation.
The result of their head in the sand approach is three consecutive asset bubbles in 20 years, with increasing amplitude.
Janet Yellen is Yellin’ For More Free Stuff
Note that Janet Yellen is Yellin’ For More Free Stuff
Yellen is a former Fed Chair as well as Biden’s nominee for Treasury Secretary. She wants “big” fiscal stimulus.
Never before has massive stimulus been needed with financial markets at all time highs.
Instead, Covid relief should be targeted in a way that does not reward unemployment or give money to people for nothing.
Yellen’s Swiss Cheese Statements on the US Dollar
Yellen also made a series of Swiss Cheese Statements on the US Dollar
Specifically, she said the “value of the U.S. dollar and other currencies should be determined by markets.”
I replied “Well La Dee Frickin Da” because it is it is Fed policy and government fiscal policy that sets the tone for the US dollar.
Steps to Weaken a Currency
- Cut interest rates
- Engage in massive QE balance sheet expansion
- Pledge to keep rates low indefinitely
- Pledge to ignore inflation and let it run hot to make up for alleged undershooting
- Encouraging more fiscal stimulus
The Jerome Powell Fed is five for five on doing the very things that would cause the dollar to sink and Yellen supports all of them.
Meanwhile, bubbles build. That’s the inflationary side. Watch out when the bubbles burst.
Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.
Yellen’s Only Regret
Please note Yellen’s only regret as Fed chair: Low inflation.
Mainstream media promotes this nonsense and it is taught in schools as part of Keynesian indoctrination.
Reflections on Global Competitive Currency Debasement
No collusion because there can’t be.
The Swiss want the Franc lower than the Euro, the US wants a low dollar, the BOJ a low Yen, etc.
It’s global competitive currency debasement
That’s what keeps the dollar from a freefall as Yellen yaps about “market forces”.
What a hoot! https://t.co/6RRYPWuNc9
— Mike “Mish” Shedlock (@MishGEA) January 21, 2021
BIS Deflation Study
The BIS did a historical study and found routine deflation was not any problem at all.
“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the study.
It’s asset bubble deflation that is damaging. When asset bubbles burst, debt deflation results.
For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?
Mish
savers are penalized, for sure. being elderly, I mind. But there will never be normal economic conditions again – the genie is out of the bottle since the end of Bretton Woods.
and the invasion of the capital? has anyone ever seen antifa?
I don’t think that Fed policy is liberal dogma, it seems to me to be big business dogma. I agree that Covid relief should be targeted but for some if you are asking them not to work (or there is no work) then it is going to be (like the musical group Dire Straits sang) Money for Nothing. The best suggestions for Covid relief (for individuals and businesses) that I have read is by John Hussman.
We have entered the unburstable bubble. either hop on aboard or enjoy being poor.
The best form of stimulus would be for the FED to pay people NOT to have children. Those born in poverty are more likely to live off welfare or commit crimes. Incarceration is expensive.
Does the Fed want to see inflation?
They measure it in CPI and index that is designed to never see inflation.
That’s where the 2% target becomes even more ridiculous.
3 controls.
The 3rd is the one to help everyone print to the moon without accusations of x-rate manipulation. Hold gold.
If 2 or 3 break down – GAME OVER.
Mish,
The junk will be buried in the trunk, just like it was in 2008.
Remember “Welcome to the vomitorium”?
Nobody…went…to…prison.
STILL the best government money can buy!
Yellen’s only regret as Fed chair: Low inflation
The Bloomberg and WSJ parrots as well as most if not all mainstream media believe this BS. And it is taught in schools.
My only regret is that she didn’t get a long cigarette holder to go along with the Ayn Rand hairdo.
And no worries nothing is manipulated.
Just added a second Tweet on competitive manipulation
3 controls.
Yield curve control – USAYield spread control – EU for Euro member nationsFuture exchange rate spread control – US, EU, UK, CH, JPN
The 3rd is the one to help everyone print to the moon without accusations of x-rate manipulation. Hold gold.
If 2 or 3 break down – GAME OVER.
So, if we’re in an Everything Bubble, then what?
Cash is trash or cash is king? Now or after another decade of asset price growth?
Fisher was not aware of the recession of 2008. per the fed minutes that have been released , he was worried about …inflation.
the doomsayers have been predicting the end of the world since…2009. they predicted tha that we would have had high inflation in the 2010’s. we never did.
it is s shame that they are paid by Bloomberg and others to hear their nonsense.
There was no doomsday prediction by anuone on Bloomberg in that article, or ever that I can recall.
We are in a different time from a Fed perspective. The goal is to keep asset values and prices higher and avoid bond crises. I see more papering over of the bond problems through computer money. Using any form of economics to explain away what we are seeing won’t work. It hasn’t worked to date. There were no computers in 1929.
Computers or not, the Fed is still essentially running a confidence game, a bigger one than ever before. The Fed is not and cannot directly prop up an entire market without having market participants play along. All it will take is for fear to take hold, probably for no specific reason at all, and markets will melt down and there will be nothing Washington can do to stop it. I think we are likely approaching that turning point, because everyone knows asset prices are just a game now and that it’s day traders and really dumb money causing new highs. Everyone on this planet is cynical, stressed and depressed right now. That can turn into fear quickly. When the fear hits that others have stopped playing the In-Fed-We-Trust game, that’s it, game over. Everyone will run for the market exits at the time time.
If Congress opens the floodgates for Treasury and Fed to work together printing money directly to spenders MAYBE they could get runaway inflation before the runaway deflation hits. Though if somehow everyone started getting $2000 every month, I’m guessing that would scare the s**t out of everybody with two brain cells so there’d be no lasting bump to demand anyway.
If these were normal times….if only…
There are hints of very bad news for those who are hoping that it’s all going back to normal this year…
….Reuters
@Reuters
·
21m
The new COVID-19 variant identified in South Africa can evade the antibodies that attack it in treatments using blood plasma from previously recovered patients, and may reduce the efficacy of the current line of vaccines, scientists said link to reut.rs 1/4
We need a macro-vaccine for all 33 strains of coronavirus. It can be done but it may take more than a few shots. I still see improvement in 2021 overall.
“we’ve been flirting with the 90 level for some time.”
So….one more point.
You might consider that if you look at a dollar index (I’m looking at the DXY right now)…it looks to me like the dollar is still in a long term uptrend off the 2008 low…and well above the trend line.
Even to say that that the DXY has changed its long term trend would require a drop down near 80, and we’ve been flirting with this 90 level for some.
In fact, looking at the very short term chart, the dollar might have reversed on 1-6-2021 to the upside…..a little early to know for sure. I don’t expect any big (or long) upside move…but the dollar is not falling through the floor.
My point is just that…….all the things you listed aimed at weakening the currency….. haven’t exactly crushed it so far….and there are pressures that support the dollar, for better or worse, that are also in play.
Quite right. They’re all fiat except the Swissie. The dollar is simply the least-worst.
Bingo: “there are pressures that support the dollar, for better or worse, that are also in play.”
See Tweet I just added on competitive currency debasement
Yeah, I get that. But I still have a hard time accepting that anybody REALLY believes the stated narrative on inflation. It’s fairly preposterous.
And just so awfully convenient.. It conceals the way inflation makes the wealth keep flowing uphill to the .01%….and the hidden inflation tax that keeps the gravy train going for the government.
But I’m just a kid from the trailer park. What do I know?.
The Fed has created a situation so bad that if they make no more “mistakes” things will still blow up, and if they make a one small move in a way that spooks markets things will just blow up sooner.
The rationalizations for equity prices here are really something. One has to assume an impossibly huge increase in economic activity and production is coming in a matter of months. Will not happen, 0% probability. Of course lots of dumb money retail has been trained to ignore macro anyway, and they are buying the top, hand-in-hand with the trend algos. Personally I put 50% probability of market collapse in 2021 bigger than dotcom bust. The world is already in the perfect storm, we are just in denial.
We have squandered so many chances in fear of pain to reverse course.
“A new all-time low for junk bond yields of 4.13%”
“You have worked inside the Fed. Given that there are sentient beings inside the Eccles Building, aren’t they a wee bit nervous over some of the valuation metrics being double the 1929 levels? I’m asking for a friend…”
“In private, yes.”
Wanna guess what the Fed is buying this month and next?
They’ve been buying junk since last June….looks like they need to buy more.
My understanding was the SPVs for junk bonds was a bunch of jawboning and not much actual purchases. I will need to look up the actual reports.
Investors are like frogs sitting in water where the temperature is slowly raised to boil.
“Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.”
I’m not sure anybody really believes this…..Maybe so, I don’t hang out with central bankers so I don’t know for sure.
But I’m tempted to say that the belief that matters here…… is the belief that inflation is a practical and politically expedient way to deal with otherwise impossible-to-manage government debt. And that without steady inflation that the entire debt-based money house of cards eventually ends up in massive bank defaults and national bankruptcy.
So it’s a lesser evil argument, inflation. And the evil is in the eye of he beholder.
Like Lloyd Blankfein…..Yellen and Powell see themselves as doing God’s work.
Others might disagree. 🙂
it matters because the debt burden goes up in real terms. then you have a Great Depression. the Federal Reserve and the US govt made the contractionary monetary and fiscal policies with other countries joining the party. this led to 25 % unemployment and the rise of Hitler in Germany due the deflation in Germany. that led to WWII and mass genocide. People in power learnt their lesson quite well.
History of the 20th century, Twitter version. It’s all so simple.
Yellen Believes – 100% certain
Yellen’s only regret as Fed chair: Low inflation
Yellen’s sellin vans down by the river