Pages

Wednesday, December 2, 2009

THE WORLD'S MOST POWERFUL MARKET


Chalk up another positive mark for the global economy: The LQD just hit a new high.

Longtime readers know we track the price of bonds for an instant read on the economy. While the stock market gets all the press, the bond market is a much larger and more powerful beast. This is where American businesses go to borrow money to pay for factory additions, new equipment, and new hires. If debts aren't being repaid, bond prices decline. If bond prices decline significantly, we have major problems.

We track bonds with shares of the LQD fund. This is a broad basket of bonds issued by big companies like Dow Chemical, IBM, and Pfizer. As today's chart shows, bonds prices are climbing. The LQD is at its highest level of the year.

Sure... the U.S. has all sorts of financial problems (the three biggest being debt, debt, and debt). But as long as real-world indicators like the LQD are soaring, we have to mind the market's message: "The government's giant funny-money program is staving off financial calamity, for now."

No comments:

THE MONEY MARKET

FRIENDS