Fears of corporate debt bomb grow

Events indicative of the end-times which may, or may not, be related to a specific Scripture.

Fears of corporate debt bomb grow

Postby Ready1 on Tue Mar 10, 2020 12:27 pm

Fears of corporate debt bomb grow as coronavirus outbreak worsens

The coronavirus panic could threaten a $10 trillion mountain of corporate debt, unleashing a cycle of layoffs and business spending cuts that would hit the economy just as some analysts are warning of a recession.

Financial markets already are showing major signs of stress. Investors are demanding higher interest payments in return for lending to less creditworthy companies; some businesses are delaying their planned bond sales while they wait for Wall Street to settle down; and ratings agencies are moving toward downgrading some corporate borrowers.

The mammoth debt bulge includes a dramatic increase in borrowing by the lowest quality investment grade firms -- those rated just one level above "junk." More than $1 trillion in "leveraged loans," a type of risky bank lending to debt-laden companies, is a second potential flash point.

Watchdogs including the Federal Reserve have warned for years that excessive borrowing by corporations, including some with subpar credit ratings, might eventually blow a hole in the U.S. economy. Now, as Wall Street wrestles with a global epidemic, the debt alarms show how investors are reassessing risks they overlooked during the long economic expansion.

"It is a big concern," said Ruchir Sharma, chief global strategist for Morgan Stanley. "We're dealing with the unknown. But given the enormous increase in leverage, the system is fragile and vulnerable."


This is the real danger of coronavirus. The cessation of the business cycle takes a robust economy, changes direction, and begins an implosion like a house of cards. Once it starts (and it may already be started) it is very difficult to change the direction back.

Furthermore, it probably dooms the reelection efforts of the President unless his opponent is even weaker than he is.
Just observing.

Posts: 2602
Joined: Mon Mar 06, 2006 10:14 am
Location: Central Cal

Return to SIGNS

Who is online

Users browsing this forum: No registered users and 1 guest