Financial Death Spiral In Full View…

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The Federal Reserve’s near-zero interest rate turns five years old next month, the longest period without an increase in history. Coupled with more than $3 trillion of asset purchases, it adds up to “Bernankecare,” said Joshua Brown, chief executive officer of Ritholtz Wealth Management in New York. And it’s causing parts of the market to behave strangely. Stocks of companies with weak balance sheets are rising twice as fast as stronger ones; junk borrowers get rates lower than their investment-grade counterparts did before the credit crisis; and initial public offerings are doubling on their first day of trading. “At some point we’ll have to pay the price of this,” said Michael Shaoul, chief executive officer of Marketfield Asset Management LLC in New York. Among the woes Shaoul foresees: “higher inflation, higher interest rates, much more difficult business conditions.” But it’s a long way off. “I would be very surprised if this bull market ended sooner than 18 months, and maybe it’s 36 months,” Shaoul said. Report continues …

 

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