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Posts Tagged ‘debt expansion’

High Demand for (Low) Yield

December 16th, 2019 by Kurt L. Smith

Long-time readers are well aware of my call to the end of the thirty-plus year bond bull market in 2012. That’s seven years now behind us. For long-term bonds this period has been quite a topping process (in 2012, 2016 and again in 2019) with the primary result being the tremendous issuance of new debt.

Treasury debt has exploded from $4.3 trillion in 2006 to $15.9 trillion in 2019 (Q2). My debt figures come from a wonderful website, www.sifma.org, check it out.  Luckily the Federal Reserve has been there as the primary buyer, expanding their balance sheet in various quantitative easing programs.

Right behind treasuries in debt expansion is corporate debt, rising from $4.9 in 2006 to $9.5 trillion (Q2). Federal Reserve Chairman Jerome Powell said in October that “leverage among corporations and other forms of business, private businesses, is historically high” –Bloomberg.

Indeed, not only are bond prices high (yields low) but there are more of them! As long as “lower-for-longer” holds, values should hold. Interest rates are low, so low it would appear that negative interest rates are a closer reality than higher interest rates.

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More Debt More Better

May 1st, 2014 by Kurt L. Smith

I was wrong. The great Credit Expansion Finished didn’t end with the financial crisis; the great Credit Expansion merely took a reprieve. While the effects of the reprieve were mighty indeed, with stock and bond prices plunging, I was wrong to believe Credit Expansion Finished. Total credit (debt) has now soared to new highs largely taking stock and bond prices right back up with it.
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The Madness of Crowds

December 9th, 2012 by Kurt L. Smith

With the countdown clock to the Fiscal Cliff now inside thirty days one does not need my monthly missive to stir fear, panic and depression.  Washington has you covered this month.  Therefore, I will take a more optimistic stance: I believe your Cash and Bonds are well positioned for the current and future environment. (more…)

NEWS FEED

The $247 trillion global debt bomb washingtonpost.com/opinions/the-2…