This much can’t be gainsaid. The combination of encroaching recession and even moderate liquidity draining moves will be enough to trigger Wall Street fainting spells, like those of this past week, and with increasing amplitude and frequency.
The fact, that the junk bond market is already falling apart and CCC yields have soared back to 17% is not just due to an isolated bust in the shale patch; its a warning that the hunt for yield that massive central bank financial repression triggered in the financial markets is about ready to become a stampede for the exists.
So get ready for the monetary gong show which starts next week.
Today’s Commerce Department report on total business sales and inventories further confirmed that the inventory to sales ratio is now decidedly in the recession red zone. This means that the Fed’s liquidity draining moves will join hands with rising risks of recession.
Can the third great bubble of this century survive a Fed that finally wants to get off the zero bound after its way too late, but can’t do it anyway without a massive crash inducing cash drain from Wall Street? And in the teeth of the next recession to boot?
Yes, the end of the bubble does begin on December 16th.