From our internal research thread this morning…
This is telling…
Cathie Wood from ARK Invest says she treats the FAANG stocks like cash…..
Yes… that’s the problem, and that’s what has the Fed so obsessed with the market…
They’ve essentially manipulated the return on “money assets” (savings, cds, etc) to zero, and forced everyone out on the risk curve…
I.e., as people view stocks like they used to view their savings, systemic/economic risk rises exponentially…
The Fed becomes (is) the bond buyer of last resort…
I.e., as people view stocks like they used to view their savings, systemic/economic risk rises exponentially…
Hence the Fed doing everything they can to keep stocks buoyant!
and.. how long can interest rates stay at zero?
forever?
Virtually forever is the plan….
do bonds exist in that world?
who buys them?
Treasury bonds become like JGBs (Japanese govt bonds)… They’re largely owned by the Japanese Central Bank, and they barely trade… They offer no market signal whatsoever anymore…The Fed becomes (is) the bond buyer of last resort…
so the gov continuously lends companies cash w/no interest rate?
Not exactly (although, yes [or almost] on a real basis)… there’ll be a cost to corporate debt… and I don’t suspect they’ll kick every company’s can down the road…
That said, with the market knowing that the Fed’s there to buy up whatever’s necessary to keep credit markets numb, yields will remain very low…
If/when the bond and/or currency market gets away from them (it’ll be awhile I suspect), it’ll be very very ugly…