Alternative Visions - US Financial Bubbles Revisited: US Stocks, Junk Bonds, Covenant-Lite Loans, Pension Funds, & Bitcoins -11.17.17
Dr. Rasmus reviews conditions in the three financial markets approaching or at bubble levels. Causes of excess demand driving prices in US equity markets are discussed—including Fed near zero interest rate policies since 2008; record corporate profits and $1 trillion annual stock buybacks and dividend payouts; multi-trillion $ corporate bond issuance; shift to ETFs and passive investing in stock markets; foreign money capital inflows to US; record margin debt issues in stocks; and Trump policies of multi-trillion dollar corporate/investor tax cuts, business deregulation, low US$ exchange rate policy, and expectations of infrastructure spending and free trade deal renegotiations. Trump policies as new subsidization of capital incomes via fiscal-trade policy, as central bank (Fed) reduces its subsidization of capital monetary policies. Warnings of financial instability growing by Bank of America and hedge fund multi-billionaire, Paul Singer. Rasmus looks at other candidates for financial instability as well—pension funds’ hike risk investing practices, trend toward ‘covenant-lite’ lending, emerging junk bond selloff underway in Telecom sector and in China, and Bitcoin and crypto currencies extreme price bubbles. (Next week: The US Senate’s Trump Tax Cuts).
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