Examples for me have included:
1. The 'Pets.com' sock puppet coming back years later as the mascot for the '1-800-bar-none' sub-prime lender.
(this may have been a once in a lifetime event - recall that Pets.com paid millions for a superbowl add with this mascot and then went bust; only to have the same mascot resurrected years later for a sub-prime lender at the top of the subprime wave}
2. Very large multi-strategy hedge fund controller prior to 2008 bragging to a friend about how all their fund had to do is stay in business several years and they would all be rich....
3. Recently, a junior employee of an investment firm's long-only high yield bond investment team, speaking with a more seasoned manager at a different firm: "nothing is cheap anymore, covenants are light, but we don't care because we are supposed to buy and we will continue to buy because interest rates are zero, investors are begging for yield and if we don't buy these things, somebody else will."
From the article below, at least somebody at the Fed seems to agree, which is a good thing. To the extent that the monetary spigots are turned down a bit, however, it would seem that investors in monetary assets will have to deal with whatever hangover as this latest binge of credit easing is pulled back....
Is it time to take a vacation and simply allocate to short term instruments in various currencies until the latest binge is over?
From Bloomberg news...
Fed's Fisher Sees 'Extraordinary Speculative Activity' in U.S.l
By Caroline Salas and Rainer Buergin
Federal Reserve Bank of Dallas President Richard W. Fisher said he sees “extraordinary speculative activity” in the U.S. after the central bank pumped record amounts of stimulus into the economy.
“There is an enormous amount of liquidity sloshing around,” the regional bank chief, who votes on monetary policy this year, said in a speech today in Berlin. “There is abundant liquidity in the machine we know as the United States economy.”
The Fed will likely complete its planned $600 billion of Treasury purchases in June, Fisher said, reiterating his view that no further monetary stimulus will be needed after that. The 62-year-old bank president has criticized the plan, which policy makers voted to keep in place after their March 15 meeting in Washington.
“The word that we gave was that the program would end in June,” Fisher said in a Bloomberg Television interview. “That’s what I expect to happen. And the markets have in my opinion adequately discounted that.”
Fisher repeated remarks he made yesterday in Frankfurt that he’s seeing signs of excess evidenced in the surge of so-called covenant-lite loans and the return of payouts by private equity firms.
“We have done our job,” Fisher said at a forum hosted by the American Academy in Berlin. “We are certainly at risk of doing too much now.”
‘Self-Sustaining’
The U.S. economic recovery is “self-sustaining” and will withstand turmoil overseas, Fisher said in the Bloomberg Television interview. The earthquake in Japan may impact the U.S. economythrough some “price and supply chain effects short term,” and the “wars in North Africa” won’t have a “long- term impact on the nature of monetary policy,” Fisher said.
“These can of course pinch a nerve or they can give you a bit of a shiver,” Fisher said. “I don’t think they’re going to derail what’s happening in terms of the economic growth occurring in the U.S. or here in Europe.”
