The new US bubble

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There’s always one and in this cycle it’s corporate debt, from BofAML:

 

In the first several years 2010-2013 the Fed-induced declining interest rates and QE drove retail money into bond funds and ETFs. Then increasingly with the help from foreign central banks – in response to global weakness the – foreign investor moved in. As we have documented extensively, this year we are seeing accelerating foreign buying and still meaningful inflows to bond funds/ETF. Of course the stability concerns in our market are centered around the fact that a lot of retail and foreign money does not naturally belong here, and that flows could reverse with a shift in monetary policy. Again, we share those concerns but the “financial instability” phase appears only a very low risk anytime soon – and this is not just under the Fed’s control as foreign central banks play crucial roles. The Fed can end the inflows to bond funds and ETFs if they want to, but will have more difficulties keeping foreign investors out.

We know US investment is terrible so where did all of the debt go? From S&P:

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.