Summary: Fed now purchasing virtually everything including corporate bonds<br> Dodgy debts, CLO's, & Poison Apples<br> FDIC considering scrapping quarterly bank reports...<br> <br> <br> <br> The McAlvany Weekly Commentary<br> with David McAlvany and Kevin Orrick<br> <br> Fed’s Money Man Can, Just Like The Candy Man Can<br> July 1, 2020<br> <br> Mood is everything when it comes to politics, because now we’re talking about the mob. And if there is anything we’ve learned in the last three to six weeks, is the mob can be happy on Tuesday, very unhappy on Thursday. Will it be the defining factor in November? Adequate liquidity between here and November influencing social mood such that it is the determining factor in who wins or who loses?<br> <br> - David McAlvany<br> <br> Now here are Kevin Orrick and David McAlvany<br> <br> Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany. Dave, I couldn’t get this song out of my head, “The Candy Man” back from the sixties or the seventies, but I’m thinking about the Federal Reserve. They “can take a sunrise and sprinkle it with dew and cover it with chocolate and a miracle or two…” You know, the Federal Reserve Man, the money man, the money man can. And you know, I thought about it. The money man can cause he mixes it with liquidity and makes the world taste good. You know what we’re seeing right now, if I were to go into the bond market corporate bond market and try to buy Bond. Guess who I’m competing with. I’m competing with the Federal Reserve man, the candy man, the money man, the people who can actually just print money and buy it right out from under me, even corporate bonds right now!<br> <br> David: There’s a lot to talk about in the debt markets and the lion’s share of the Fed purchases are still focused in the ETFs where the structure of the product is unstable when investors are selling, very stable when investors were buying. But again, if you’re unable to accommodate liquidations, there’s a structural issue. So the Fed has stepped in and they are the buyer of first last resort whatever for ETFs. But now they’ve started the corporate bond purchases and, you know, thank you for smoking, they’ve bought some Philip Morris and a little bit of everything. They want to represent a bond index. The problem is, when you’re talking to the average middle class man or woman, you say, well, we’re also buying Daimler Chrysler, we’re also buying some foreign corporate bonds. It doesn’t necessarily make sense, but then again, maybe it doesn’t have to make sense as long as the candy man is making us all happy.<br> <br> Kevin: You think about a bubble. Okay, a bubble, the substance of a bubble is almost zero, okay, but it looks large and it’s empty inside. I think about the European Central Bank over the last few years just buying everything. And now what we’re seeing is the same thing. So we’re continuing to try to keep this bubble inflated. I heard a story, a lady we know was getting married, and her father wanted her to have a particular dress. Well unfortunately from the time that she picked the dress out to the time that she was going to buy the dress, the wedding shop went out of business and it was owned by the creditors. And now this lady was very fortunate because her father had the wherewithal to buy the whole inventory so that she could get that dress. So are we getting our entire financial system out of hock? Is it a similar situation right now with the Federal Reserve just buying everything?<br> <br> David: Let’s hope it’s a happy wedding because frankly, when the Fed gets involved, oftentimes it’s more of a shotgun wedding type of a thing. And you know, the forced issue is what we’re concerned about. You’ve got yield curve management, it’s not like it is the first time we’ve seen it. They’ve talked about it, the Federal Reserve has,
