Nosebleeding Corporate Debt

I can't believe the news today
Oh, I can't close my eyes
And make it go away
--U2

Size of the US corporate debt market, currently at $9.8 trillion, has surpassed the size of the mortgage backed securities market in 2007.

The idea of corporate deleveraging is a myth. The current debt orgy puts corporate leverage higher than 2008.

Dallas Fed head Richard Fisher, who has been one of the few central bank bureaucrats to voice concern about the Fed's QE program, stated that he'd "have to hire Sherlock Holmes to find a single distressed company priced attractively enough to buy."

The Fed is blowing the ultimate credit bubble. After MBS popped in 2007, emphasis shifted to Treasuries as risk was shifted from private to public balance sheets. Now, with rates so low, corporations are back in the game at record levels.

Market distortions are massive, as programs of financial repression have influenced investors to play along in risky assets. This has driven asset prices to nosebleed levels.

Moreover, past interventionary actions prompt market participants to believe that their risky behavior is insured by policymakers. As in the past, policymakers will surely have their backs if prices once again move against them. Right?

Nosebleed prices, record leverage, massive moral hazard.

Hard to imagine a set up more pregnant with risk.

position in SPX