This won't end well...
As Credit Bubble Bulletin's Doug Noland concludes today after a deep dive in the Flow Of Funds data...
Credit Bubbles survive only so long as ample new Credit is forthcoming.
Asset Bubbles persevere only so long as new “money” flows readily into the asset class and prices continue to inflate. I have argued that the current Bubble is deeply systemic, impacting virtually all asset classes. Undoubtedly, however, the most spectacular Bubble excesses continue to unfold throughout global bonds and fixed-income.
I can appreciate Bill Gross discussing a $10 TN “supernova” that’s going to explode catastrophically “one day”. I can also respect legendary speculator George Soros’ decision to return to active trading with a host of bearish views and bets he expects to pay off one day soon.
Gross and Soros are examining the same world as we are and must be in similar utter disbelief at what has transpired. Things turn notoriously Crazy near the end. We have witnessed Historic Crazy.
And even central bankers are getting anxious (as The FT reports)...
"A small change in central bank interest rates risks triggering an abrupt reversal in global markets, in echoes of the last financial crisis, the head of the German Bundesbank has warned.
In his latest warning on the unwanted side effects of persistently low interest rates, Jens Weidmann said investors and asset managers could become ‘increasingly nervous’ in a world stuck with near negative rates as it raised the possibility ‘of a sudden hike in risk premiums’.
He said monetary policymakers’ attempts to issue forward guidance hinting that rates will stay lower for longer, and lengthy aggressive bond-buying, had ignored consequences for financial stability..."