The Smart Money
Those in the know are betting on rising inflation and rising rates for longer.
What does it mean when the largest investment-grade corporations are issuing huge amounts of bonds and when America’s wealthiest family funds are piling into bonds but shedding pubic-corporation stocks? These are among the so-called “smart money” — the ones who know how to preserve their wealth and their credit ratings.
The first party isn’t buying bonds; they are issuing them, but why would you take on massive amounts of new debt now with interest rates so high? The answer given in one of today’s articles by MSN is simple: they are just that sure rates are going up much higher for longer than they can wait them out. They want to lock in those high rates for the money they need to raise before the situation gets worse.
They are not betting on rate cuts anytime soon; that’s for sure. T-Mobile, for example, is looking to raise $2-billion, including unsecured senior notes with 10-year and 30-year terms.
The Seeking Alpha article that MSN sources (only available with an SA membership, so I’ll quote it for you) says rather starkly,
What about those family wealth-management offices that are buying all the debt while ditching stocks? They’ve been on this diet all year, and they’re staying with it. The highly conservative shift, according to Citi, has been the largest since Citi started the study during the 2020 crash.
Sounds like this who know how to keep what they’ve got are continuing to bet inflation rules the Fed and other central banks, so the Fed and other central banks still go higher for longer. They didn’t stay rich through many stock crashes and recessions by not knowing how to preserve their wealth while fools squander theirs in greedy gambles. Who do you think they sell to?
It’s not a hard call, really. Central banks have been telling us this all year. It’s just many don’t want to listen. Just as the above two articles came out this morning, another one was published relaying the clarion message of central banks:
Which also means the duration can do as much economic damage as higher-level rates.
The Fed may hold off at this next meeting to give more time to see what is happening with inflation … unless inflation comes in with a big surprise in the upcoming report; but the consensus among economists (who are not the crowd with the best foresight) is that the Fed will still raise one more time this year and then hold all of next year. That, as far as I’m concerned, is what the Fed already forecast and underlined as its best-case scenario. It all depend on whether inflation keeps its head down, and it did just poke its unblinking crocodile eyes above the water.
Of course, nothing refuels that inflation like rising crude prices.
Says another article today:
My position since the first of the year has held solid with inflation rising again as oil rises again. Time will tell, I guess; but let us close on a slippery-as-oil humorous note:
The Biden Administration announced today it is releasing $6-billion in sanctioned Iranian oil money to Iran in exchange for six prisoners. To make things clear, Secretary Blinkining-his-eyes, said in his most clear-eyed manner that this money is designated to be used solely for humanitarian purposes.
Apparently the blinkin’ secretary forgot that money is fungible because Iran immediately figured out what you and I did the second we heard his statement and announced it will use the released oil money anyway it wants because all the needs of its people are humanitarian.
Before reading their response, my own reaction was, “So, what if they show they spend it solely on helping their own people? The fungible part of money and budgets is that $6,000,000,000 in new funds that goes to existing budget areas that feed and support the people frees up $6,000,000,000 in revenue that was already budgeted for those causes to be shifted over into building nuclear weapons and funding terrorism.”
So, that was the not-so-smart money, doled out by our secretary as he stared ‘em down without even blinkin’.
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