Juggling Dynamite

Monetary policies run dry…

High Frequency Economics Chief Carl Weinberg discusses so-called helicopter money. Pimco Executive Vice President Tony Crescenzi also speaks on “Bloomberg Surveillance.” Here is a direct video link.

The subprime auto industry boomed over the past 6 years on a familiar foundation of lax lending and packaging sketchy loans as investments–similar to the 2008 sub-prime mortgage crisis. For more see: “They had created this remarkable system for taking every last dime from their customers.“.

Auto lenders can steer vulnerable people into crushing debt. Keegan-Michael Key and Bob Balaban help John Oliver show exactly how.  Here is a direct video link. (Profanity warning).

Meanwhile, as shown in the below updated chart from the St Louis Fed, the delinquency rate on commercial and industrial loans (in blue) has been spiking over the past year and is now approaching the peak rate seen in the 2008 crisis (recessions in grey bars), while high yield bond yields (in red) like stocks, remain priced for the fantasy of endless calm and economic prosperity.  In reality, yield spreads always rise to catch up with delinquency rates again, as euphoric junk bond and stock prices sink.

A recent survey from Bank of America Merrill Lynch reinforces my comments (see:  Captive money is not ‘smart’ for investors) about the fee-maximizing bias of financial firms to have client capital fully allocated to risky assets at all times:  last month found that cash levels were the highest levels since November 2001 at 5.8% of portfolios:

“Globally, sentiment remains weak. Global asset allocators are holding the highest average cash balance since November 2001, while equity allocations have dropped to four-year lows,” BAML said in a note.

So 94.2% of client savings allocated to risky assets at extreme valuations is considered defensive.  This is why so few people are able to buy low in any meaningful way once bear markets arrive.  Buy with what?  What risk management?  It’s a joke, but not funny.  See:  Forget the stock rally, investors are holding cash.