One ugly side effect found in the colossal ramp up in global quantitative easing (government bond buying) is in the disconnect between oil and high yield bonds.  Credit risk is clearly rising but U.S. junk bond yields remain suppressed as international yield seekers have come to America with open check books.

What are the implications?  Reach out to us here:

Oil and Junk Bonds

Oil in blue, junk bonds in white are singing a classic warning sign for us all.  The disconnect is eerie.  As long as desperate insurance companies in Tokyo and Frankfurt have an unending thirst for yield, U.S. junk will be mispriced.  Short Junk Now.

Japan vs  Germany

German and Japan 10 year bonds, married at -0.08%, a true global growth story.

In the end, central banks will be viewed as capital destruction vehicles.   Far too much debt as been sold at ridiculously high prices.  Bonds are more expensive today than internet stocks in 1999, sell Mortimer sell!

Get on our latest report here:

Germany and Japan

Two countries with over $9T of global GDP, it’s hard to believe both are sitting with bond yields below zero.  Today, the German 10 year yield crossed Japan’s at a whopping -0.09%.

Investors globally are starting to worry about a taper tantrum in Japan.

In May 2013, after a soft suggestion of a pull back in government bond purchases by then-Fed Chairman Ben Bernanke, panic spread in the market, leading the 10-year Treasury yield surged 140 basis points (1.40%) in just four months.  This week, as Japan launched a colossal $274B fiscal stimulus plan, many worry that their asset purchase (government bond buying) gravy train has come to an end.

As we’ve stressed to subscribers, a surge in bond yields back to 2011 levels would equate to nearly $4T in bond losses to investors world wide.

Implications? Pick up our latest report here: