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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsCorporate America will bring next wave of pain, money managers warn
Corporate America will beget the next wave of financial pain, or even recession, a growing choir of the worlds biggest money managers is warning.
After years of borrowing for stock buybacks and company buyouts at extremely low rates, the tide is turning as the Federal Reserve raises its target rate and pulls stimulus. Thatll pressure the swollen ranks of overleveraged firms and weigh on growth, Guggenheim Partners Global Chief Investment Officer Scott Minerd said. Pacific Investment Management Co. and BlackRock Inc. are among investors curbing purchases or being pickier about what they buy.
Debt levels crept up as central banks suppressed borrowing benchmarks, with the proportion of global highly leveraged companies -- those with a debt-to-earnings ratio at five times or greater -- hitting 37 percent in 2017 compared with 32 percent in 2007, according to S&P Global Ratings. When that burden collides with rising rates, it could cause a recession in the late 2019 to mid 2020 window, Minerd wrote in an email.
As funding rates rise, the burden from higher borrowing costs will end up stressing corporate America, which means companies will look for other ways to reduce expenses, Minerd said. Layoffs will feed into the labor market, reduced capital expenditures will directly impact GDP growth, and all of this will drive the probability of recession higher.
https://www.msn.com/en-us/money/markets/corporate-america-will-bring-next-wave-of-pain-money-managers-warn/ar-AAvyfBY?li=BBnbfcN
But but but the Trump tax cuts were supposed to save us
Dawson Leery
(19,348 posts)It started in late 2007 and ran into early 2009, right in time for the election.
No one is talking about the unsecured debt obligations (car loans/home equity/student loans/credit card debt) that have been packaged into ETN's (electronically traded notes).
Wellstone ruled
(34,661 posts)Nasty issues underlying our Economy. We have a Inflation Story banging on the Door and zero means of solving it.
This Administration with the help of the GOP are rapping our Nation Financially.
Dawson Leery
(19,348 posts)They rape and pillage.
Wellstone ruled
(34,661 posts)that is true.
dixiegrrrrl
(60,010 posts)and about the same sub-prime debts now packaged in those loans.
but no one listens.
Nothing was done to change the mortgage bond game, it only increased via the other loans you mentioned.
Toss in un-affordable living costs in major cities, sharply decreased wages, and you have another perfect storm.
Extra plus this time around...Trump's fucking over the markets and generally increasing stability all over the place.
Dawson Leery
(19,348 posts)Also, some mutual funds are invested in them.
Imagine having your retirement invested in B-grade and/or junk debt.
dixiegrrrrl
(60,010 posts)I took it out in April of that year, on a hunch.
poboy2
(2,078 posts)peggysue2
(10,828 posts)More damage for Democrats to clean up. A monotonous cycle--Republicans drive the economy into a ditch, Democrats have the thankless job of pulling the economy back from the abyss, amnesia sets in, the propaganda machine gears up and the cycle starts all over.
You'd think people would catch on by now.
Ugh!
VOX
(22,976 posts)And, yes, Im already counting 45, as shits heading for the tank already.
The last two Democratic presidents kept things above water (Clinton produces a surplus).
Always cleaning up after the right wing warmongers and nutcases.