The next bubble?
The year 2000 gave us the dot.com bubble, 2007/2008 gave us the Mortgage Crisis bubble..With stock markets at record highs, do ser an underlying bubble that disrupt Wall street as the past two have?
Terry Says
I’m guessing it will be a “debt bubble” — and not necessarily U.S. debt. Corporate debt has been growing dramatically as companies take advantage of lower rates to borrow. Now about HALF of all corporate debt is rated BBB — the lowest “investment grade” debt. For comparison, in 2008 only about 35% of corporate debt was rated BBB. Yet pensions are buying this debt because it has higher yield. If a recession comes, some issuers may default — and some may be downgraded, meaning pension funds must sell these holdings. That could create a pricking of the debt bubble. And if you own risky bonds in a bid for more interest, even if the bond continues paying the bond price could decline as institutions sell those bonds.
