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Loans Versus Bonds Relative Value: Week of July 30
The ripfest is unending. Only 6 HY indicative bonds are trading wider of a 1,000, and 6 loans are risky enough to merit 600 bps or more. A combined 4 bonds and loans were wider for the week out of 60. And in the absence of perma yoyo TRW going either 500bps wider or tighter, it was Neiman Marcus' turn to shine in the "ridiculous gyrations" corner.
This is pure unadulterated greed and, for lack of a better word, insanity. 5x leveraged companies can easily issue new bonds at 8%, with investors flipping them five minutes post break for 150 bps. And somehow nobody has flashbacks to the credit frenzied summer of 2007.
Welcome to the new (much more temporary) credit bubble: we are all happily (and cognizantly) in it.
Source: LoanConnector
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There is no reason to buy securities of any kind right now. Either our overlords have actually figured out how to juice everything to escape velocity or there will be another crash. If assets really are going to appreciate forever then we can jump in at any time and become wealthy no matter what, so why not wait and confirm the trend (e.g., by waiting for things like earnings to come back)? On the other hand, there is a very slight chance that this sucker is going down (hard to believe, right?). In that case, you still want to hold onto your cash. This is not the time to buy anything. Unless cash becomes too worthless to buy into our soaring markets. Is that how this turns out? I have no idea, I took a red pill a while back and still haven't figured out how deep this rabbit hole goes...
I used to think there were too many guns, ammo and gold guys here but they may at least be on track.
I have a couple of questions:
It seems that guns and ammo have never solved important issues in the past - how's Vietnam, Afghanistan or Iraq working out? I doubt we'd shoot the 12-year old neighbor daughter for stealing a cob of corn.
Gold:
Isn't gold just another non-government Fiat Currency? Seems the only reason it has value is because (over centuries) we said it does. Or is the fact that it's non-government the key?
It is a fiat currency, but try doubling the supply. It's the constraint that matters.
IMO more because it's effectively market price determined non-inflatable cash. IOW, they can't control it.