In regards to ECB QE bond purchases, inquiring minds may be asking: What hath ECB president Mario Draghi Wrought?
I can explain in one picture.
The answer in words: The world’s biggest junk bond bubble.
I prefer gold.
On August 4, I commented on the Bubblicious Debate: Greenspan Says “Bond Bubble About to Break”, No Stock Market Bubble
There’s a bond bubble for sure, but it’s in corporate bonds, not treasuries.
This also isn’t the first time Greenspan has expressed concern about a bond bubble. Two years ago, when the 10-year Treasury yield was 2.44% and the CPI was 0.2%, he told Bloomberg TV that “we have a pending bond market bubble.” In a Bloomberg TV interview July 2016, he expressed concerns about stagflation and said “we’re seeing the very early signs of inflation beginning to tick up.” He also said with the 10-year Treasury yield pushed down to 1.50% by Brexit concerns, that he was “nervous” bond prices were too high.
“No Irrational Exuberance in Stocks”
“There is no irrational exuberance that I can see. In fact, it is just the opposite at this stage.”
Greenspan the Contrarian Indicator
Major comments by Alan Greenspan, widely portrayed by the media are most likely perfect contrarian indicators.
He has been calling the bond market a bubble for years but only recently did he say there was no stock market bubble.
With Greenspan, one needs to be careful. He is frequently correct about some things. However, the things about which he is correct are either never widely published, or they are widely disputed.
An example of the latter is free trade. Greenspan was a free trade advocate his entire life. The mainstream media disagrees. An example of the former and the latter is in regards to entitlements. From the very same video I quoted above Greenspan offered these words of wisdom.
“You can’t get growth going so long as entitlement expansion is anywhere near where it’s been recently. It’s eating up the sources of investment and the sources of growth and you can’t have it both ways. You cannot fund all of the entitlements that everybody wants and expect that you are going to get GDP growth out of that at three percent or more.”