All Over Again

(Image: source)

Call me cynic, but it's hard to see this as a good thing:

"Junk ETFs Draw Most Cash on Record as High-Yield Hunt Speeds Up" (Bloomberg)

Exchange-traded funds for speculative-grade bonds are drawing the biggest inflows on record from investors seeking easier access to higher-yielding assets.
 
ETFs that track junk-bond indexes have tapped $5.5 billion of investments in the securities this year, according to data from Lipper. That almost quadruples the $1.4 billion recorded during the same period of 2011, which was then the highest since the fund research firm started tracking junk ETF data in 2007.
 
While exchange-traded funds comprise 2 percent of the $1 trillion in U.S. corporate speculative-grade debt outstanding, they accounted for more than a third of the total $14.8 billion of inflows this year into mutual funds and ETFs that buy junk bonds. With the Federal Reserve pledging to hold its benchmark interest rate near zero until at least late 2014, investors are seeking better returns, said Peter Tchir, founder of New York- based hedge fund TF Market Advisors.
 
"ETFs are giving people a fair degree of comfort, providing them with daily transparency and the ability to see a trade in and out, and asking for relatively low fees," Tchir said. The funds allow individual investors to speculate on debt ranked below investment grade without owning the bonds, which is stoking more flows into ETFs.

In fact, it's looking more and more like 2007 all over again.

Got those crash helmets ready?

Comments

[Nothing's safe]

Schapiro: Considering capital rule for money funds

Schapiro also said the agency is seriously considering permitting a floating net asset value for money-market mutual funds, a prospect that money fund managers argue would severely hurt the industry.

http://www.marketwatch.com/story/schapiro-considering-capital-rule-for-money-funds-2012-02-24?link=MW_story_latest_news

[Junk bonds go with junk economics]

QE3 only needed if economy deteriorates: Fed's Bullard
(Reuters) - A third round of Federal Reserve bond purchases should only be done if the U.S. economy deteriorates, and the United States is not in that situation now, a top Fed official said on Friday.

http://www.reuters.com/article/2012/02/24/us-usa-fed-bullard-idUSTRE81N0PC20120224

Uh oh....

Then there's the unemployment picture, which is cloudy. John Williams
who publishes Shadow Statistics, runs the unemployment figures the
“old way,” which is the more accurate way. John figures the true
unemployment rate is around 22%, and I believe it. The unemployment
rate for youngsters 18 to 25 runs nearer to 40%, and from what I hear
if you're young you literally can't find a job. If you're looking,
don't bother with the US Post Office.

My view -- living standards will have to come down in the US if we are
ever to get anywhere near full employment.

But what about inflation? The Fed says that there is no inflation,
that is -- if you don't consider the price of food and energy. Of
course, those of us who pay taxes, medical bills and college tuition
have a different take on inflation, but figures can lie and liars can
figure.”
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/24_Pierre_Lassonde_%26_Richard_Russell__Epic_Gold_Buying_%26_Inflation.html

U.S. Postal Service to Cut 35,000 Jobs as Plants Are Shut
http://www.bloomberg.com/news/2012-02-23/u-s-postal-service-to-cut-4-9-of-jobs-by-closing-almost-half-of-plants.html

P&G to cut 5,700 jobs in restructuring
http://www.cnbc.com/id/46500935

Ooops...

[Junk Yard Dogs]

Big Banks Squeeze Billions in Profits from Public Budgets

An estimated $28 billion already taken out of public budgets to pay banks on swap deals, big banks seek to collect billions more.
Big banks are profiting at state and local governments’ expense using the same toxic financial instruments that helped crash the economy. These derivatives known as interest rate swaps, were sold to governments with a promise that they would lower their borrowing costs but have now become a huge liability. The banks have already taken as much as $28 billion from state and local governments. Now, during the worst public budget crisis in memory, the big banks seek to collect billions more from toxic deals that local and state governments are trapped into and are forcing layoffs and cuts to services to cover payments to banks.
Big banks must renegotiate or cancel the derivatives, which could prevent the transfer of billions of dollars from public budgets to big banks.

http://www.seiu.org/images/pdfs/Interest%20Rate%20Swap%20Report%2003%2022%202010.pdf

[SurvivalAndProsperity.com]

"It's looking more and more like 2007 all over again." Maybe early 2008, with rising asset prices, higher crude oil prices, but still falling home prices?