Investors are in a buying mood

Friday’s Wall Street Journal reported a very interesting thing, that corporations had sold $35 billion worth of bonds in the first week of the year.  Last year saw the biggest opening week since 1995.  So, in other words, investors are clearly in a buying mood.

For me, this is a strong indication that folks are feeling comfortable enough about the credit worthiness of businesses and about the strength of the economy that they are willing to move from high liquidity (i.e. cash) to low liquidity (bonds).  This is no small thing.  Back in the fearful days of the Great Recession the credit/bond markets seized up.  Businesses that had long been reliable couldn’t get their banks to lend them money for even short-term cash needs.  It was a catastrophe!

This sort of seizure only happens when the trust has been drained from the system and paranoia is rampant.  Those painful moments have definitively passed.

That report also indicates that corporations are willing to take on more debt – $35 billion worth, in fact.  To take on a fixed obligation like paying interest means that businesses are more confident in the stability of their cash flows.  In turn, that is an expression of their confidence in the future of the economy.

Can you see that small pieces of information are often indicative of important things?  Thought so!

Jason