GFC 2.0 ? or not?


#81

I fell like they wasted the effect to protect the bubble, instead of waiting for first wave to break it and then help to maintain some sensible level which would help in long months needed to recover society.

Although, bubble was “sensible” to them :confused:


#82

# ECB announces €750 billion Pandemic Emergency Purchase Programme (PEPP)


#83

Panic Emergency Purchase Programme.

So what will be the inflation for 2020? 15 or 20%? :confused:


#84

The resignation surge or phenomena noted, tracked and watched for some time, has been given a more recent look at by ZH.


#85

Thread title could almost be changed to
Great depression 2.0 or not?


#86

CEOs have been pumping their own stock right in front of investors eyes for years. Anyone who hasn’t figured it out has no place writing about investments. All those companies have been using cheap money to do share buybacks. How otherwise do people imagine the markets got to such dizzying heights when everyone is so loaded with debt?

Why do you think the markets entered a mad panic at the merest hint that the Fed (or anyone else) would try to reign in Q.E.? This is not an oddity, it has been the plan all along. The people with assets have been taking everyone else to the cleaners. And shareholders have been loving it. You pay a CEO tens of millions and a ton of shares to increase shareholder value. What’s he gonna do when the path of least resistance is to use other people’s money to buy the company’s own stock?

Obviously the insanity had to stop some day, and it is hardly a surprise that it was triggered by something like Covid-19. But the virus was not the cause of it nor should we get all conspiratorial about the coincidence. It’s simply an opportune time for overpriced executives to make off with their swag.


It's Happening+++
#87

UK US seems very active.


#88

Thought this was interesting…


#89

S&P is distorted by flood of imaginary money from “outer space” :roll_eyes:


#90

https://www.bloomberg.com/news/articles/2020-05-07/united-airlines-sees-weak-demand-for-2-25-billion-junk-bond?sref=V47xycDY

** United Airlines Slaps 11% Yield on Struggling Junk Bond Sale**

United, hardly one of the worst companies out there, tried to get a subordinate issue off at 9% and had to up their offering to 11%. When you consider that a disco dog of a company like Eir , hardly 10 years out of examinership and €1.5bn worth of burning junior bondholders could get an issue off at under 5% last year this rate of interest is pretty seismic in the corporate world, in my opinion anyway.

The airline is offering a yield of 11%, which was increased from initial discussions in the low 9% range for the deal, said the people, who asked not to be identified discussing a private transaction. The changes come after the three and five-year bonds had only received about $1.5 billion of orders as of Thursday morning, the people added.

Investors have so far proven eager to lend to companies that have been hit hard by the coronavirus pandemic. But the pushback on United’s deal suggests they still have their limits, and may be reluctant to jump in without the double-digit yields and iron-clad collateral seen in previous offerings.

The company has also added a clause that would trigger repayment of the bonds at a substantial premium to par, known as a make-whole, if the company files for bankruptcy, the people said.

The company’s shares had already taken a beating earlier this week after Warren Buffett dumped his stakes in the four U.S. biggest airline carriers, saying the industry’s prospects had been upended by the outbreak.

They finally gave up tonight.

https://www.bloomberg.com/news/articles/2020-05-09/when-united-pawned-old-jets-bond-traders-sent-a-stark-warning

Late on Friday, after some 48 hours of frantic attempts to lure investors to their faltering bond sale, executives at United Airlines let it be known that the deal was dead.

It was an odd moment, stuck smack in the middle of one of the busiest corporate bond booms ever, a period in which investors have shown themselves to be receptive to almost any debt offer backed by good collateral. But this last part was where United got in trouble. For collateral, it had scraped together 360 old jets, some of which analysts considered would be nearly worthless in a few years.


#91

The UK just sold its first ever negative-yielding government bond

The U.K. borrowed at a negative interest rate for the first time on Wednesday, amid growing fears of a deep global recession and expectations of further bond-buying action from central banks.

In an auction Wednesday, the country’s Debt Management Office said it sold £3.8 billion ($4.66 billion) worth of three-year gilts at a yield of negative 0.003%.

This negative-yielding bond means the British government is effectively being paid to borrow. Investors will get back slightly less than they initially paid if they hold the bond to maturity, such is the demand for shoring up money in bonds.

The auction means Britain joined Germany, Japan and several other European nations in selling government debt with a negative yield.

Link


#92

Same logic as this company.


#93

A new issue trading at 80% within weeks cannot be good. I still think that junks will drag up interest rates across the board, eventually including sovereigns. In other words good corporate issues will move towards 5% and good sovereigns towards 3% coupons on 10 year.

I cannot predict the when though. !


#94

There are no blue chips any more, morons like Boeing span out junkier and junkier debt and blew it on share buybacks to the point where the money expended by American Airlines, on buybacks in the past 10 years, is four times greater than its market cap today. And it is left with $25bn of debt to show for that…and a few planes I suppose.

According to a Forbes investigation, which analyzed 455 companies in the S&P 500 Index—excluding banks and cash-rich tech giants like Apple, Amazon, Google and Microsoft—on average, businesses in the index nearly tripled their net debt over the past decade, adding some $2.5 trillion in leverage to their balance sheets. The analysis shows that for every dollar of revenue growth over the past decade, the companies added almost a dollar of debt. Most S&P 500 firms entered the bull market with just 20 cents in net debt per dollar of annual revenue; today that figure has climbed to 38 cents.

But as the coronavirus pandemic cripples commerce worldwide, American corporations face a grim reality: Revenues have evaporated, but their crushing debt isn’t going anywhere.


#95

Here is where global comes in. A lot of ‘non traditional’ lenders have appeared in the sovereign debt market in recent years, PE and Hedge funds even. They lent at unwise levels, and rates, to the non solvent worldwide.

The low interest rates of the past decade led to an unlikely alliance between poor countries and international investors. Governments, state-owned companies and other businesses were able to raise money relatively cheaply to finance their growth, while investors searching for better returns than they were getting at home gobbled up that debt. As a result, developing countries owe record amounts of money to investors, governments and others outside their borders: $2.1 trillion for countries ranked as “low income” and “lower-middle income” by the World Bank, including Afghanistan, Chad, Bolivia and Zimbabwe.

You would have to wonder what sort of genius on wall st lends to Afghanistan or Zimbabwe. :frowning:

Poor countries have long been able to borrow from institutions like the World Bank and International Monetary Fund, or from the governments of their trading partners, like China. But in recent years their debt, usually in the form of bonds, became popular with private investment firms. The investment funds in turn placed it with client pension funds, family offices and exchange-traded funds. And those entities have their own interests and their own rules, which will complicate any effort to negotiate easier terms for the borrowers, such as stretched out payment schedules, lower interest rates or reduced principal.

getting a workout seems impossible.

Argentina’s multiyear dispute with a group of hedge funds including Elliott Management is a reminder of what can happen when a country lapses on its debt payments to investors. Elliott Management, a New York hedge fund run by Paul Singer, and others bought Argentine bonds shortly before the country defaulted in 2001, and held out for full repayment — at one point even seizing an Argentine naval vessel — rather than settle through a debt restructuring. When the sides finally settled in 2016, Elliott received nearly 400 percent of its original investment, according to Argentine officials.

It looks like the sovereign blowup will cripple half the worlds countries for many many years to come. Argentina mererly being first among equals. :frowning:

If there are many more cases to be heard like that of the corrupt Detelina Subeva shown below then the misery, and resolution, will drag on for the next 20 years.


#96

How many defaulting countries does it need to break the system?


#97

One.


#98

One if it is the USA that defaults, even a technical default such as removing the dollar conduit via HK to China which is not implausible right now. It would take 20 countries, widely spread, to break the ‘emerging’ country sovereign debt market and that does look quite plausible at present.

It last happened in 1981 or so but that was confined to south and central America who had a torrid decade after they defaulted.


#99

Dow Jones Industrial:

5/6/2019: 25,540
5/6/2020: 26,282

West Texas oil back up to 39 bucks a barrel now


#100

All I can say is that all the helicopter money had to go somewhere.
How much was production cut back to achieve those prices, the real world economy has taken a few steps down, yet the dow is up, some real disconnect there.
Is this all due to Amazon, making a killing on on-line sales at the detriment of most other retailers many of whom may not see this Christmas.

The fat lady hasn’t even arrived at the stage door yet!