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June 2020

The Fed is buying corporate bonds now…what’s next, stocks?

JTNDdmlkZW8lMjB3aWR0aCUzRCUyMjEwMCUyNSUyMiUyMGhlaWdodCUzRCUyMjEwMCUyNSUyMiUyMGNvbnRyb2xzJTIwcG9zdGVyJTNEJTIyJTJGd3AtY29udGVudCUyRnVwbG9hZHMlMkYyMDIwJTJGMDYlMkZZaWVsZC1DdXJ2ZS1GbGF0dGVuaW5nLmpwZyUyMiUzRSUwQSUyMCUyMCUzQ3NvdXJjZSUyMHNyYyUzRCUyMiUyRndwLWNvbnRlbnQlMkZ1cGxvYWRzJTJGMjAyMCUyRjA2JTJGWWllbGQtQ3VydmUtRmxhdHRlbmluZy0wNjIwMjAubXA0JTIyJTNFJTBBJTNDJTJGdmlkZW8lM0U=Now the fed is looking at corporate bond purchases through exchange traded funds. Welcome the new world of yield curve control. But what does that mean for you, your portfolio and the economy at large? Yield curve control. Nice, fancy word. It's largely focused on keeping interest rates low, primarily at the long bond end. Because let's face it, we're borrowing a lot of money. And to the extent that that money being borrowed is long-term debt, it does behoove the government to keep the cost of that debt down. But not just for the government. It also affects the economy and industry at large. With low corporate rates right now, there is the question, is this even necessary? When we talked about buying corporate bonds back in April, the spread between corporate bonds and treasuries was rather large. But now that spread's fairly narrow, and that suggests the corporate…
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Will $3+ Trillion Ignite Inflation?

JTNDdmlkZW8lMjB3aWR0aCUzRCUyMjEwMCUyNSUyMiUyMGhlaWdodCUzRCUyMjEwMCUyNSUyMiUyMGNvbnRyb2xzJTIwcG9zdGVyJTNEJTIyJTJGd3AtY29udGVudCUyRnVwbG9hZHMlMkYyMDIwJTJGMDYlMkZJbmZsYXRpb24uanBnJTIyJTNFJTBBJTIwJTIwJTNDc291cmNlJTIwc3JjJTNEJTIyJTJGd3AtY29udGVudCUyRnVwbG9hZHMlMkYyMDIwJTJGMDYlMkZJbmZsYXRpb24ubXA0JTIyJTNFJTBBJTNDJTJGdmlkZW8lM0U=The United States has injected over $3 trillion into the economy and it's debating even more. How will that impact inflation? Being an election year, the administration is a little bit more willing to prime the pump through November, than maybe in a more traditional year. Will this pump priming trigger inflation? Those of us who remember the 1970s know that inflation can be a scourge. It saps your purchasing power, destroys the value of a fixed income. There's reason to fear inflation. But to understand inflation we need to understand what drives inflation. As any freshman Economics student will tell you, inflation is really too many dollars chasing too few goods. But there are two saucers of inflation. One is Demand-Pull inflation. Money times velocity equals the money supply - the availability of money. What is velocity? Velocity is how many times a year the money is spent. So…
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