It is scary that we boomers were not already in risk off mode. If you are near or in retirement shouldn’t your risk posture be low risk. I know I am. I could not stand a significant loss of principal but I don’t need huge earnings. I need steady income. If the Fed keeps lowering rates it is going to be hard to make much of a steady income if risk off investments have a negative real yield. Even 30 year treasuries make negative real interest.

What the central banks are doing forces people to put their money into equities. I would hate to be a pension fund manager.

Large funding costs indicated that primary dealers: major financial institutions hand-selected by the U.S government were hoarding collateral. No one wanted to lend.

Who could blame them, nobody who is actually a good risk is borrowing money. The wrong places are carrying most of the worlds debt and they already have too much debt. If you are a low risk then people will pay you to take their money. My credit card companies do as much. They loan me money interest free, don’t charge me fees and give me a cash back reward. I already mentioned that U.S. bonds have negative real interest rates. Germany has flat out negative interest rates.

If the markets climb faster than real GDP growth where does the principal or capital come from to buy the stocks? How much stock is purchased with borrowed money? For stocks to rise doesn’t the dollar volume of purchases have to exceed the dollar volume of sales so money must be flowing into the market. How much of that was borrowed money and now that the market is falling it seems some place there will be a squeeze.

TEK