An electronic run on the bank began last week in the junk bond market. It continues this morning. It will spread as selling begets selling. Has this been planned to allow Yellen to call off her rate increase on Wednesday or is it a result of speculators realizing the party is over and all heading for the exits at the same time? 1931 here we come.
The first Christmas tree in NYC was actually erected in 1931 in the worst year of the Great Depression when just about all the foreign sovereign bonds defaulted on Americans causing massive bank failures. The first tree was put up in hopes of raising the spirits of the people in their dark hour of need. It was not the stock market crash that devastated the finances of the people, it was the bond collapse. Andrew Mellon had first commented when bonds rallied and stocks fell in 1929, that this was why “Gentlemen prefer Bonds”. By 1931, those words demonstrated that even conservative men lost their shirts.
