2018’s Number One Risk

To find the market’s biggest weakness, a good place to look is at the most crowded movie theater with the smallest exit.
European bonds.
You’ve probably seen the charts of European high yield floating around, so I won’t reproduce it here. Yields in the low 2s for BB credits. There was also a European corporate issuer that managed to issue BBB bonds at negative yields a few weeks ago. I think that might have been the top.
No shortage of stupid things these days:
Bitcoin Litecoin Pizzacoin Canadian real estate Swedish real estate Australian real estate FANG Venture capital But European bonds are potentially the stupidest. Maybe even stupider than bitcoin!
Although there is nothing stupid about it – the ECB has been buying every bond in sight, and there’s lots of money to be made frontrunning central banks.

This post was published at Mauldin Economics on DECEMBER 21, 2017.