Couple that with the boom in corporate debt the entire risk spectrum and we have a massive bull market in junk bonds and leveraged loans. As Brian Reynolds points out in this outstanding interview pension funds have been the ones fueling this equity boom in their frantic search to make 7.5% to cover their defined benefit payouts.
Pensions have been gobbling up illiquid garbage to keep from going broke. That illiquid garbage puts billions in play to buy stocks and fuel buybacks. Cities and municipalities are raising taxes to cover the shortfall. Rising taxes will fuel slower growth, tax receipts falling and the cycle reaching a crescendo that makes the late 1970’s look like an Amish barn-raising.