SIGN #1: JUNK BOND PRICES AT RECORD HIGHS
The Fed, et al., have been buying up all of the ‘safe’ bonds, with the twin intents of driving down interest rates and chasing investors into riskier assets. With lower yields comes (hopefully) more borrowing; and when investors move towards riskier assets, this drives up the equity markets – which, as the thinking goes, will paint a rosier picture of the economy plus boost consumer confidence and spending.
Along with this, however, we find speculators and investors, starved for yield, chasing the junkiest of the junk.
Indeed, the prices of these “assets” have recently been driven to all-time record highs, which means that their yields have hit record lows.
And not just “low” prices, but a brand new record low in all of financial history.
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