…corporate debt is just one notch above junk status!

by | Jul 8, 2019

“In every life, there comes a day of reckoning – a time when unsettled scores demand retribution, and our own lies and transgressions are finally laid bare.”

– Emily Thorne

Part of the answer has been revealed. 

Last Friday’s job report gave evidence of a strong job market.  Over 224,000 jobs being created last month.  Having rebounded from the previous month, June’s numbers showed little reason for Fed easing later this month.

Alan Greenspan has said in the past that the last hike in a tightening cycle is probably not needed.  Perhaps Mr. Powell has read Mr. Greenspan’s mention of this and is trying to figure out how to take the last rate hike back.  So far, the data isn’t giving him much support.  But the month is young, and CPI and PPI will get reported later this week.

I’m hoping the Fed doesn’t cut rates and that a path to normalization continues. 

The world is awash in fiat currency as central banks around the world try to stave off dwindling growth and deflation.  But at some time soon the monetary derivatives of QE will need to end less we have the day of reckoning.  How much more can be achieved at the margin with a 25 or 50 bps rate cut?

Half of all corporate debt is just one notch above junk status.

Agustin Carstens of BIS (Bank for International Settlements) states that because of continued global QE, we run the risks of asset misallocation, asset mispricing, and loss of financial stability.  Our monetary policy cannot save the global economy, but it can do grave damage to the domestic economy we live in.


Running the risk of another self-induced crisis seems hardly worth it.  The next one may be more costly than the last.

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