Bonds |

Yeah. This is Going to End Well.

From this Bloomberg story comes more evidence that corporate America and the financial industry continue to push further into uncharted territory with debt levels at big companies surging past previous record highs and an increasing share being used to finance such society-benefiting activities like share buybacks and acquisitions as shown below.

Of course, the Federal Reserve has nothing to do with this alarming trend and former Fed Chief Ben Bernanke would be the first to tell you so, as he did yesterday with William Cohen in this offering from the NY Times Deal Book blog:

“The low rate of interest isn’t something that God gave us here,” he explained. “It’s something that is a feature of the economy.”

“So”, in the words of Jesse Pinkman (and Walter White), “There’s that”.

Rep. Brad Sherman (D-CA, Surprise!) urged Federal Reserve Chair Janet Yellen to postpone the central bank’s first rate hike until the middle of next year citing God’s plan for this sort of thing, a factor that has not likely been included in the Fed’s decision making model.

Sherman warned:

If you want to be good with the Almighty, you might want to delay until May.

Later in the day, Sherman commented on Twitter:

Don’t actually think God has an opinion on monetary policy, but if She did, She would agree that the FOMC shouldn’t increase rates in winter.

So, there’s that…

Druckenmiller Does Not ♥ the Fed

Hedge fund manager Stanley Druckenmiller has high praise for the Federal Reserve’s response to the financial crisis, but nothing good to say about the organization that didn’t see it coming and has now fostered new bubbles that are sure to end badly.

Notes Druckenmiller:

You would have thought we’d have gotten out of emergency measures… At some point, over six years, when you have zero rates and quantitative easing, you move investors out the risk curve, you cause emerging market governments … to act in ways they’ve never been able to act in history because markets wouldn’t have let them … you cause corporations to start acting in bizarre ways, buying back twice as much stock at prices two-and-a-half times where they were four or five years ago…

QE Shock?

The chart below is among the many pearls to be found in a Bank of America note over the weekend that has been making the rounds today.

Also of interest in the note are a couple of observations from BofAML (not to be confused with NAMBLA)  as reported in this story at Bloomberg:

For every job created in the U.S. this decade, companies spent $296,000 buying back their stocks, according to the New York-based bank.

“Zero rates and asset purchases of central banks have, thus far, proved much more favorable to Wall Street, capitalists, shadow banks, ‘unicorns,’ and so on than it has for Main Street, workers, savers, banks and the jobs market,” the BofA team wrote.

The risk is that the bull markets driven by central banks swoon

It’s all good…

Financial Markets and the Fed

After the financial market turmoil of recent months, the response of the Federal Reserve to said turmoil, and then the reaction of markets to yesterday’s dovish September Fed meeting minutes, it’s not at all clear that this cartoon accurately characterizes the relationship between Wall Street and the nation’s central bank.

Lately, it looks like markets are telling the Fed what to do and, in the process, making them look foolish as a result (either that or Fed economists just don’t have a clue about anything).

From the cartoon archive of Daryl Cagle.

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