BBB Bonds Galore

We are concerned about the bond market in the United States.

Bonds rated BBB, the lowest rating of the investment-grade market, account for 50 percent of the Bloomberg Barclays investment-grade bond index, versus 38 percent before the financial crisis.

How risky are BBB rated bonds today, compared to a few years ago is up for debate; however, if the economy slows and there is a wave of redemptions, a mismatch in buy and sell orders could result in some bad, bad things happening.

Companies have understandably loaded up on cheap money. With the strong U.S. economy, the ability of companies to shoulder higher leverage has increased, but eventually, all debt is supposed to be repaid. The exception appears to be the federal government, with their infinite power to run the printing presses.

By Vito J. Racanelli, wrote in Barron's on August 17, 2018:

The enormous increase in issuance of the lowest-quality investment-grade credits over the past ten years—BBB-rated bonds that sit just above junk—is akin to the accumulation of brush and dead trees on the forest floor.

The voodoo the traditional and robo advisors are selling when it comes to index-based ETF bond funds could have you up a creek without a paddle, and the water is thick, brown, and stinks.

We agree.

As of 2018 there were $3 trillion worth of U.S. BBB bonds, an increase from $700 billion in 2008.

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Paul Truesdell