Yesterday, we highlighted [9]the all too eerie coincidence that the very first hedge fund (not mutual fund) to gate investors late on Friday, was operated by none other than the two former heads of distressed/high yield trading of the bank that started it all, Bear Stearns.
Today, things get even eerier, because while we already have the Bear Stearns link, an even more curious coincidence emerged when according to the BofA-Merrill index of "CCC and below" bond yields, the index just hit 17.24%, soaring nearly 2% in just the past two weeks, and rising fast.
When was the last time the same index was at precisely 17.24% and rising? The answer: the weekend Lehman Brothers filed for bankruptcy (check for yourselves: on Sept 15, 2008, the closing effective yield was 17.27 [10]%).
[11]
What happened next? This.
[12]
And while no bank has blown up this time (to the best of our knowledge) the irony is that the catalyst driving the long, long overdue blow out in yields is the trifecta of plunging oil, the soaring dollar, and of course, fears about the tightening financial conditions as a result of the an "imminent" rate hike.
In other words, the Fed.
And while history rhymes, it usually does so in very ironic ways, and we can't wait to find out if indeed Yellen's first rate hike in 9 years this Wednesday unleashes a Lehman-like neutron bomb that leads to the full collapse of the junk bond market first, and then the shockwave spreads across all asset classes leading to the same financial devastation witnessed at the end of 2008, unleashing the longest period of "free capital markets" central planning the world has ever seen.
