Stocks lurched lower yesterday as nervous investors digested an errant Trump tweet that threatened to blow up U.S.-China trade talks.
Those folks are losing sight of the fact that we're in a different, more dangerous fever swamp altogether – the Fed's "great experiment," cheap-money fever swamp. It's a bizarre place where it's perfectly normal for markets to tank by double digits in one quarter and soar by double digits the next after an announced rate-hike "pause."
Yes, cheap money is a hell of a drug.
Case in point: More than 20% of today's stock "buyers" are actually companies drinking their own cheaply financed, poisoned Kool-Aid.
Expect the resulting $270-plus billion in stock buybacks expected this quarter to push this "most hated of all bull markets" higher… because there certainly isn't a business case for going higher.
As stocks rise, investors are bailing out of equities, where some $132 billion recently left global stock mutual funds for the dangerously deceptive green pastures of the bond market.
Those "green pastures" are now the home of around $1.3 billion worth of horrible "leveraged loans," packing appallingly weak loan documents and egregious terms. These loans threaten to see hordes of bond holders ripped off; they'll be lucky to recover maybe $0.40 for every $1 of bad debt they've bought into.
The situation is so dicey that right now, as I write this, teams at Guggenheim and Blackstone's GSO Credit are furiously combing through these horrific bonds in an effort to create their own internal rating system; they're bracing for a tipping point in the equally absurd bond market.
But that's the new normal for you.
And today, I'm going to show you how to get ready for the next normal, when the Fed's cheap-money party ends and markets enter free fall.
If you're ready when this happens, you'll find just as much – if not more – profit opportunity around every corner.
About the Author
25-year run as a hedge fund portfolio manager, family office chief investment officer, managing director and general counsel. Internationally recognized expert in credit and equity markets as well as macro risk management.