For the life of me, I can't understand how people can miss bubbles. They're so obvious. Last year, the bond market floated 408bn in new junk bonds. The yield on ccc's is 7.4%. Companies get ccc ratings when default is HIGHLY LIKELY. B's are paying 5.4% the lowest in history.
But here's the problem. In 1999 we had a drop in the fed funds rate because of Y2K, (remember that) and that led to a bubble, but that bubble led to MASSIVE job creation. MASSIVE by any standard. Labor force participation, UI rate, jobs created per month. Yet today, rates are half what they were then, We have ZIRP where money is free to banks. And there has been over a trillion in bond issuance.
WHERE ARE THE JOBS? Where's the boom? Where's the GDP?
When a company sells a bond with a ccc rating, what could it possibly use the money for OTHER than job creation. A ccc company needs to GROW not simply recover. In his speech last week Kyle Bass said "we're back to 2007". What he meant was the stupidity and greed is back to those levels.
NOBODY and I mean nobody with a penny of skin in the game would sell a junk bond with a 5.4% yield. These bonds are being sold by liar advisors to people who don't know what a bond is. This year, as my tax clients have trickled in, I've asked each one, "do you know what a bond is?" About 1/2 said yes, but NONE could actually explain it to me.
"Greenspan: No 'Irrational Exuberance' in Stocks Now
Greenspan said in a " Squawk Box " interview that stocks by historical standards are "significantly undervalued" even considering the recent moves higher. He added that the payroll tax increase didn't dent spending because of rising asset prices."
Yep, I'm selling my assets (transferring the means of production to the Blankfein crow) to live high off the hog.
You are making a basic error in your argument. You are assuming that you are dealing with people of good moral character. You are not. A good number of your countrymen believe in an economic model predicated on a fixed quantity of wealth that needs to be redistributed. If you have such a viewpoint, a bubble is nothing more than a opportunity to shift someone else's wealth onto yourself by selling them an over priced asset. The fact you might be cheating someone else is not a problem as long as it remains legal.
WHERE ARE THE JOBS?
Companies have learned to maintain profitability by becoming more efficient, and also by taking advantage of a very soft labor market. Money is cheap because people don't feel the need to borrow it.