Bubbles Everywhere in a Bubble Economy

In a “bubble” market, all sorts of incongruities show up, and of course, there is no shortage of pundits who will claim that “this time is different” or some similar epithet to describe irrationality.

But make no mistake, the markets can remain irrational longer than most can remain solvent. It is on that basis that renowned investor Jim Rogers once reminded me that the bubble economy can and will do things that defy reason – and for a lot longer than anyone can think or imagine.

The bubble will continue until it cannot; and only then you will witness the inevitable day of reckoning. Until that day comes, we will point out the warning signs as they pop up.  

Here today I present you risk premium, that extra buffer to account for extra risk, for the worst kind of debt. Thanks to the FT, this is what it says:

"The premium, or “spread”, above benchmark government bond yields on triple C-rated US corporate bonds, which sit on the precipice of defaulting, has fallen to just above 6.4 percentage points, according to data from Ice Data Services. The spread has been lower on only two occasions: in 2014, just before a collapse in oil prices roiled the debt of energy companies, and in the run-up to the 2008 financial crisis."