Bubble Trouble: Record Junk Bond Issuance, A Barrage Of IPOs, “Out Of Whack” Valuations, And Grim ..
Bubble Trouble: Record Junk Bond Issuance, A Barrage Of IPOs, Out Of Whack Valuations, And Grim Earnings Growth
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
When Blackstones global head of private equity, Joseph Baratta, said Thursday night that we were in the middle of an epic credit bubble, the likes of which he hadnt seen in his career, he knew whereof he spoke.
Junk bond issuance hit an all-time record of $47.6 billion in September, edging out the prior record, set in September last year, of $46.8 billion, according to S&P Capital IQ/LCD. Year to date, issuance amounted to $255 billion, blowing away last years volume for this period of $243 billion. The year 2012, already in a bubble, set an all-time record with $346 billion. This year, if the Fed keeps the money flowing and forgets about that taper business, junk bond issuance will beat that record handily.
Junk-bond funds got clobbered in July and August as retail investors briefly opened their eyes and realized what they had on their hands and fled, and they went looking for yield elsewhere, but there was still no yield in reasonable places, and so they held their noses and picked up these reeking junk-bond funds again. Cash inflow doubled over the last week to $3.1 billion, the most in ten weeks.
These retail investors were fired up by the Feds refusal to taper even a little bit, giving rise to the hope that it might actually never taper, that this is truly QE Infinity, Wall Streets wet dream come true on the theory that the Fed is mortally afraid that any taper would blow over the sky-high financial-markets house of cards it has constructed over the last five years. And the retail cash returned to these junk-bond funds and just about refilled the hole that had been dug during the summer. ......................(more)
The complete piece is at:
http://www.nakedcapitalism.com/2013/10/wolf-richter-bubble-trouble-record-junk-bond-issuance-a-barrage-of-ipos-out-of-whack-valuations-and-grim-earnings-growth.html#VucVGbFrqQeW9Mwe.99