The Debt Bubble & Big Money

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The trends in global debt are interesting to say the least. There are major shifts in debt that people are not really paying attention to. Chinese companies actually borrow more than their American counterparts topping $14 trillion in corporate-debt markets. Then there is the shift in public funds that present an interesting situation for the current debt bubble. Where in 1931, the foreign bonds were sold in small denominations directly to investors, this time we have public funds holding long-term debt, yet people can withdraw their money on short-term demand. The debt bubble when she bursts is going to produce some serious departures in the way markets interact. These trends are strikingly bullish for US equities where companies are at record highs in cash, low in debt, and offer the few alternatives to the Sovereign Debt Crisis for big money.

US Equities are becoming the only real game both for central bank reserves and the escape hatch from a debt bubble that many just do not understand this time around. If people panic out of long-bond funds, we can see the yield curve widen and the spread reach actually historic highs.