Authored by John Rubino via DollarCollapse.com,
While the Japanese and Swiss central banks have turned themselves into hedge funds by loading up on equities, the US Fed has stuck to supporting the stock market indirectly, by buying bonds. It’s worked, obviously, with all major US indexes at record highs. But it won’t work going forward, thanks to two gathering trends.
Conduit CMBS (Commercial Mortgage Backed Security) debt outstanding is down from $740 billion in 2007 to $400 billion currently according a recent note from Goldman Sachs. The Non-Agency RMBS (Residential Mortgage Backed Security) Market, not backed by the US Government, has been contracting at a rate of 10 percent year, mostly due to prepayments and studious lenders paying off their loans. Agency RMBS (loans backed by the US Government) have been steadily climbing, reaching a level of $200 billion in issuance for the trailing 12 months.