This Is A Bubble
Ok look, I know we've said this over and over.
But the evidence just keeps piling up.
High yield credit is a goddamn bubble. And it refuses to burst.
Hell it was just yesterday when we noted that if you want to know just how resilient junk has become, you need only look at Wednesday when, in the face of crashing equities and spiking vol, HY managed to hold up so well that its relative performance (vis-a-vis the S&P) was in the 94th percentile versus the history of the last two-years. Mor
It really is epic. It’s almost like there’s a large portion of the population who forgot they bought these risk assets. They’ve been relatively “safe” for so long that they set it and forget it. When high yield collapsed as far as it did in early 2016 compared to 2008, we were a couple months from total collapse. My understanding is that china’s 1 trillion credit orgasm along with buying oil indiscriminately for strategic reserves at any price simultaneously was enough to drive the mother of all short squeezes and now people are numb.
It’s the herd mentality!
Those buffalo just ran right off cliffs, been doing it for thousands of years ha ha!
Often wondered why those buffalo never seemed to wise up?
As everyone with any financial awareness knows, big bubbles in credit and stocks and housing and all assets (except ag) are induced by global near-zero rates for a decade. It’s that simple. We are living history, and I’m afraid, it will become very bad history.