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Sometimes it's
not so hard predicting the future.
If, for
example, you have reports like this --
"Fed's Fisher Says US Economy
Has Too Much Liquidity" (CNBC)
The U.S.
economy has moved from having too little liquidity to having more than
enough, a top Federal Reserve policymaker said on Thursday.
"We've
gone from too little liquidity to too much," said
Richard Fisher, president of the Federal Reserve Bank of Dallas.
A steep retreat
in oil prices suggests this liquidity and the speculative activity it
generates — not just strong demand from emerging markets — are
driving the market, Fisher said.
"What the
correction indicates to me is that there's a lot of liquidity out
there," Fisher told reporters after a speech. That puts him at odds with
other top Fed officials, who have argued that the Fed's ultra-loose monetary
policy cannot be blamed for driving up commodity costs.
Asked about the
Fed's exit strategy, Fisher said investors should not prejudge the outcome
based on minutes from the central bank's April meeting that hinted that many
officials favor interest rate hikes rather than asset sales. --
and this --
"Companies
Rush to Borrow" (Wall
Street Journal)
Firms
Fill Up on Debt Before Fed Closes Door on Easy Credit
U.S.
companies are racing to fill up on borrowed money, amid worries that interest
rates are set to rise once the Federal Reserve ends its support for financial
markets next month.
Johnson &
Johnson staged its biggest bond deal on record Tuesday. Texas Instruments
Inc. raised debt for the first time in more than a decade Monday, and Google
Inc. sold its first bond ever. Smaller companies like Great Plains Energy
Inc. are also loading up on debt at some of the lowest interest rates ever.
All told,
investment-grade companies sold $19 billion of bonds in the U.S. in the past
two days, according to data provider Dealogic,
setting the week up to be among the busiest so far this year. Bond sales in
May have reached $56.7 billion—with two weeks left to go in the
month—almost as much as the $59.6 billion sold in all of April.
Companies have
already loaded up on debt over the past two years amid continued low interest
rates. But in recent weeks, rates have moved down again, reaching their
lowest level of the year. Making borrowing even more attractive right now:
Many corporate treasurers expect interest rates may rise quickly once the Fed
ends its $600 billion Treasury-bond buying program in June.
.
"Rates
are so low it's hard to see them going much lower, but it's easy to imagine
them going higher," said Kevin March, chief
financial officer of Texas Instruments, which sold $3.5 billion of debt in its
first offering since 1999. The money will help pay for its purchase of
National Semiconductor Corp. Texas Instruments paid less than 1% for some
two-year debt. At current rates, "You just shake your head and say, 'This is
pretty amazing,'" he
said. --
It's not so
hard figuring out what's coming next.
Hopefully,
you'll be more prepared than all those "investors" buying junk bonds, junk stocks,
and junk real
estate with reckless abandon -- and soon-to-be-expensive
funny money.
Michael J. Panzner
Editor, Financialarmageddon.com
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