Fed to Buy Government Debt

[brencat]

Isn't the buyer still going to demand 7.5%, especially with inflationary policy? The risk to investing in high yield bonds doesn't change simply because a treasury is valued less. If anything, that should signal greater risk.

Nope. Investors will buy any new issue they think will rise 1-2 pts on the first day of trading. And they will give the underwriter the worst grief too if they don't get a good allocation on what is expected to be a hot deal, even if they haven't done enough secondary business regularly to deserve said allocation.

In the classroom, your theory makes sense. In the real world, it's 2/3rds sentiment and momentum, and 1/3rd relative value/valuation/research that drive investment decisions. Kind of sad isn't it? (I am an analyst for a Wall St bank btw). This is why credit spreads are so tight right now and back to pre-2008 crisis levels even as it looks like we're staring into the abyss again.

 

[Genx87]

Then try reading and then comprehending because everything I say that sounds convoluted becomes clear at a higher lever of understanding.

Im sure it does. I just dont have enough time in the day to smoke that much weed to achieve that level.

 

[LegendKiller]

Buffett is a buffoon! Everyone knows the Fed's have everything under control.

If you look at the context of his statements with his prior investments (railroad for the surge in consumer goods demands) you would see that his concern is that the economy takes off and the government and the Fed doesn't claw back spending and/or liquidity.

Considering the deficit is largely driven by tax cuts, rathe than actual increases to spending, you can either eliminate the tax cuts or cut spending, I think the former is more likely than tha latter. In that case the taxes will create a break on inflation.

 

[piasabird]

According the the shows on stocks, and Jim Cramer, any time a company buys its own debt (Stock) back it causes a lack of confidence in the stock.

 

[hal2kilo]

According the the shows on stocks, and Jim Cramer, any time a company buys its own debt (Stock) back it causes a lack of confidence in the stock.

Was Jim moving his lips? Never seen anybody backfill like he does when he's wrong.

 

[Narmer]

If you look at the context of his statements with his prior investments (railroad for the surge in consumer goods demands) you would see that his concern is that the economy takes off and the government and the Fed doesn't claw back spending and/or liquidity.

Considering the deficit is largely driven by tax cuts, rathe than actual increases to spending, you can either eliminate the tax cuts or cut spending, I think the former is more likely than tha latter. In that case the taxes will create a break on inflation.

Takes off? lol. When is that supposed to happen?

I see slow growth in our future.

 

[piasabird]

I see a big depression.

My wife went to the unemployment office today and the lines were really long. People losing their jobs in St Louis, MO. Whatever, the Govt tells you for unemployment figures, multiply by 2. This will be a long winter.

 

[werepossum]

I find moonie to be very lucid.

For extra credit, class, decide if this person is smoking the same stuff or merely equally high.
😉

 

[JSt0rm]

*News flash*
the guy from a southern state doesn't get it.

I find moonbeams posts to convey information in a creative way. Sometimes requiring extra thinking to read between the lines. If you either choose not to or are unable to read into what he writes then its your loss. The difference between me and moonie is he probably mourns for your loss and I just see you as another 0 I wont have to compete with in the future. 😉

 

[LegendKiller]

Takes off? lol. When is that supposed to happen?

I see slow growth in our future.

That was my point.

 

[halik]

Then you're perfect to work for the fed.

Don't get that...

 

[halik]

If you look at the context of his statements with his prior investments (railroad for the surge in consumer goods demands) you would see that his concern is that the economy takes off and the government and the Fed doesn't claw back spending and/or liquidity.

Considering the deficit is largely driven by tax cuts, rathe than actual increases to spending, you can either eliminate the tax cuts or cut spending, I think the former is more likely than tha latter. In that case the taxes will create a break on inflation.

The quote i heard on cnbc is that 70 percent of the deficit is due to the tax revenue drop rather than new spending.

 

[halik]

Nope. Investors will buy any new issue they think will rise 1-2 pts on the first day of trading. And they will give the underwriter the worst grief too if they don't get a good allocation on what is expected to be a hot deal, even if they haven't done enough secondary business regularly to deserve said allocation.

In the classroom, your theory makes sense. In the real world, it's 2/3rds sentiment and momentum, and 1/3rd relative value/valuation/research that drive investment decisions. Kind of sad isn't it? (I am an analyst for a Wall St bank btw). This is why credit spreads are so tight right now and back to pre-2008 crisis levels even as it looks like we're staring into the abyss again.

Actually bulk of the spread compression lately has been institutional money reaching for yield; low rate environment isn't good for people that have fixed liabilities to support from their portfolios. That and most places have a lot better capital position compared to 09 and 08, so you can go down in credit if you have to.