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"Bubble" In Riskiest Credit Exceeds 2008 Peak

Tyler Durden's picture




 

As we warned two months ago, the bubble in credit markets (which if you ask anyone at the Fed, except Jeremy Stein, does not exist) is nowhere more evident than in the explosive growth of so-called cov-lite loans. While total volumes of cov-lite loans are already at record, as the FT reports, we now have 55% of new leveraged loans come in “cov-lite” form, far eclipsing the 29% reached at the height of the leveraged buyout boom just before the financial crisis. LBO multiples have reached record highs and demand for secutizations of these levered loans (CLOs) has surged on the back of the Fed's repressive push of investors into more-levered firms and more-levered instruments.

 

 

 

Via The FT,

The amount of riskier loans offering fewer protections to lenders contained in packages of debt sold to investors have hit record levels, amid resurgent lending markets and a continued thirst for higher returns.

 

...

 

as “covenant-lite” loans, or loans that come with fewer protections for lenders, have this year become the norm in the US, CLO managers have been forced to relax the limits on the percentage of the loans that can go into their deals.

 

Already, 55 per cent of new leveraged loans come in “cov-lite” form, eclipsing the 29 per cent reached at the height of the leveraged buyout boom just before the financial crisis.

 

...

 

CLO managers have clearly taken notice of this trend, and structures have come with more relaxed caps on cov-lites this year.

 

While the majority of CLOs sold last year had a 40 per cent limit on the amount of cov-lite loans that could be bought by the vehicles, a 50 per cent cap has become the industry standard in 2013, according to data from S&P Capital IQ.

 

At least three deals have come to market this year with a 70 per cent limit.

So wondering where the leverage is building this time? Well, record high margin debt in stocks and record high exposure to the riskiest (and least protected) credit structures once again... but it's different this time (as Moodys told us).

 

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Mon, 11/18/2013 - 20:53 | 4167693 DoChenRollingBearing
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Bitcoin at $700 - $800 seems pretty bubblicious...

Can't go broke if you have no debt.

 

Can't go broke if you don't loan money out either.

Mon, 11/18/2013 - 20:56 | 4167707 DoChenRollingBearing
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7:54 PM US ET

Make that $832....

Mon, 11/18/2013 - 20:57 | 4167714 LetThemEatRand
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I wonder who could be pumping that up ahead of an epic takedown....

Mon, 11/18/2013 - 21:04 | 4167746 nmewn
nmewn's picture

Zactly.

Its not like a thinly traded "commodities" price action could ever be manipulated by someone with printer.

Right? ;-) 

Mon, 11/18/2013 - 21:13 | 4167760 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

Past couple of minutes watching http://fiatleak.com/:

ALL trades were at $870 or more, saw one scroll by at $880......

 

EDIT:

8:11 PM, $907.

We are watching a fast moving bubble.  Kind of exciting. 

Mon, 11/18/2013 - 21:43 | 4167853 nmewn
nmewn's picture

Looks like a very "stable currency" to me.

#BitTulips

Mon, 11/18/2013 - 22:49 | 4168156 bigbucksr
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perhaps it is the bitcoin currency that is stable and the instable currency is the USD....after all, it is the USD that is being endlessly printed..

Tue, 11/19/2013 - 00:13 | 4168450 bunzbunzbunz
bunzbunzbunz's picture

Not alot, but still FREE BITCOINS: http://freebitco.in/?r=25727

Thu, 11/21/2013 - 10:54 | 4177114 SilverShortage
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Nouriel Roubini seems to have been right yet again check him out : http://www.roubiniblog.com (Nouriel Roubini Blog )

Mon, 11/18/2013 - 21:11 | 4167761 fonzannoon
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LTER I saw that scientology grand opening thingy in your backyard today. all the finest we have to offer was there. did you swing by?

Mon, 11/18/2013 - 21:17 | 4167774 LetThemEatRand
LetThemEatRand's picture

The scourge of Clearwater.  This City would have been something completely different and much better but for those fuckers.   The City took them on for many years on their tax exempt status but they finally gave up.  Pity, but I don't blame the City.  The cultists are too well funded.  Kind of like trying to fight the Fed.   

Mon, 11/18/2013 - 21:29 | 4167815 fonzannoon
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i commend you for not following up a cultist comment with an Ayn Rand joke.

Mon, 11/18/2013 - 21:37 | 4167834 LetThemEatRand
LetThemEatRand's picture

I knew I could count on you to make the connection!

Mon, 11/18/2013 - 21:30 | 4167816 Harbanger
Harbanger's picture

Lola.  You need to get out of the boo boo Riviera.  You're not in your socialist element.  The Floridian west coast doesn't have much potential for you.  I feel your pain, I own some land near you.

Mon, 11/18/2013 - 21:40 | 4167840 LetThemEatRand
LetThemEatRand's picture

Where else can I wear my Borat swimwear in public without body waxing?  It's worth it just for that.

Mon, 11/18/2013 - 21:57 | 4167924 Harbanger
Harbanger's picture

Not really, Just wash yourself and shave around the bush.  I'd buy you a drink if I were there.

Mon, 11/18/2013 - 20:57 | 4167713 nmewn
nmewn's picture

"There is nothing wrong with Bitcoin! I've talked to my people!" - Jim Krammer

Mon, 11/18/2013 - 20:55 | 4167698 LetThemEatRand
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In my office building, even financial advisors are downsizing office space.  They still have the coolest cars in the parking lot, but still.

Mon, 11/18/2013 - 21:00 | 4167722 Harbanger
Harbanger's picture

Why are you forever comparing yourself to others?  I bet those "advisors" don't know 1/2 of what you know.  Consider yourself blessed, bitch.

Mon, 11/18/2013 - 21:20 | 4167791 Harbanger
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Can I get an argument Lola?  Downvoting without a retort is for wusses.

Tue, 11/19/2013 - 00:43 | 4168512 LetThemEatRand
LetThemEatRand's picture

Why don't you get in your fake chopper and tell me.  You could score one for the Gipper.

Mon, 11/18/2013 - 20:59 | 4167721 spinone
spinone's picture

When this bubble bursts, its going to be on like Donkey Kong.  They are going to print like Cougar W said.

Tue, 11/19/2013 - 00:02 | 4168408 andrewp111
andrewp111's picture

When this global bubble bursts, collateral chains will collapse under margin calls so fast that one big bank after another will be forced to simply shut down. It will happen so fast that outside observers will see almost no clues of what is going on and then the entire financial payments system simply seizes up. Everything just stops working and then holy hell breaks loose all over.

Mon, 11/18/2013 - 21:02 | 4167738 Racer
Racer's picture

Pavlov's dog

We got bailed out for bad loans before

We make baddddder loans even badder we get MOAAAAR MONEEEEY

Mon, 11/18/2013 - 21:03 | 4167740 AccreditedEYE
AccreditedEYE's picture

Those extending credit delved too greedily and too deep. You know what they awoke in the darkness of private balance sheets everywhere... shadow and flame. 

Tue, 11/19/2013 - 02:12 | 4168654 Squid-puppets a...
Squid-puppets a-go-go's picture

Boromir: 'They have a forum troll...'

Mon, 11/18/2013 - 21:15 | 4167772 fonzannoon
fonzannoon's picture

Time for litecoin.

We are watching bitcoin make the gold to 5k move we always wanted to see.. We always said when it happened silver would moonshot to $500oz. So I am jumping on the train. If it gets smashed, so fuckin what, who cares anymore.

Mon, 11/18/2013 - 21:21 | 4167786 LetThemEatRand
LetThemEatRand's picture

Bitcoin is the canary in the coal mine for fiat currency.  It was sufficiently under the Fed radar for a long time and it appreciated organically in response to devaluing of fiat.  I'm guessing the coming whipsaw will be devastating to those who decided to park there.  But I hope I'm wrong.  No dog in the fight but I'd like to see it succeed.

Mon, 11/18/2013 - 21:27 | 4167807 fonzannoon
fonzannoon's picture

I have been approached by 4 people this week (as if I have a fkin clue) about buying bitcoin. if this move up was done backdoor by the fed to try to pull a gold like smash it will be met with massive demand that was hoping for a pullback. I could see that smash backfiring and the price just start rising again.

Like Kito said, the younger generations seem to want to fight the fed, it just so happens that they just don't seem inclined to do it by buying gold.

John Travolta is an alien.

Mon, 11/18/2013 - 21:45 | 4167859 Harbanger
Harbanger's picture

"Like Kito said, the younger generations seem to want to fight the fed,..."

Maybe they don't have a clue, but they "know" they have the answer, maybe Travolta is a gay alien.  Maybe there's not much we can do but wait.

Mon, 11/18/2013 - 21:47 | 4167868 fonzannoon
fonzannoon's picture

I don't think they have any answers. I think we are going to get whipsawed around until we find them. The only thing I am absolutely certain of is that Travolta is a gay alien.

Mon, 11/18/2013 - 22:48 | 4168155 Harbanger
Harbanger's picture

I had to drive for 4 hrs just to buy a brick of "velocitors" on Merrick Blvd, near Jones beach, LI.  Can you believe it?   There's a tremendous shortage, I'm living in the hills of NH, I know your neck of the woods.

Mon, 11/18/2013 - 23:00 | 4168203 fonzannoon
fonzannoon's picture

you should check in if you are back around here. you were 5 mins from me. The LIE is beautiful this time of year eh?

Mon, 11/18/2013 - 23:12 | 4168237 Harbanger
Harbanger's picture

I would love to meet you some day, we are brothers in spirit.  I would fly in to help you in heartbeat if need be.  I think I already told you to wear a shirt so I can recognize you ;).

Mon, 11/18/2013 - 23:33 | 4168296 fonzannoon
fonzannoon's picture

thanks for the kind words. seriously let me know. let's grab a beer if you end up down here.

Did you take the ferry from CT? 

Tue, 11/19/2013 - 00:10 | 4168437 Harbanger
Harbanger's picture

No, I drove there averaging 95 mph :).  We will meet someday.  I was/am a Marine, I'm also a licensed pilot and have my own chopper.  I flew down during the storm to help some family members during sandy, best time to fly, no rules.  Just give a heads up, I can be there in 20-30 minutes.

Tue, 11/19/2013 - 00:41 | 4168506 LetThemEatRand
LetThemEatRand's picture

Seriously?  And you wonder why I have stopped responding to your posts?  

Tue, 11/26/2013 - 04:09 | 4168525 Harbanger
Harbanger's picture

You always respond to everything I say like the predictable statist Ho you is.

Mon, 11/18/2013 - 21:51 | 4167808 TaperProof
TaperProof's picture

Bitcoin back down to $705  (edit 625) on bitstamp.  Its low volume, seems anyone with deep pockets can manipulate it... I don't see why not?   Motive though?   buying slowly over a month, then ramping it up and exiting your entire position in a day or two should net you a large profit.  then there is making bitcoin look volatile and thus scary to the public 

Mon, 11/18/2013 - 21:33 | 4167822 all-priced-in
all-priced-in's picture

Is the FED buying Bitcoins?

  

Mon, 11/18/2013 - 21:53 | 4167899 Van Halen
Van Halen's picture

I would like to see ZH do an article compiling all the bubbles currently taking place. I bet it would be horrifying.

Mon, 11/18/2013 - 22:00 | 4167944 Ned Zeppelin
Ned Zeppelin's picture

Bubble time. Froth and craziness. Fed is one trick, bubble blowing pony.

Tue, 11/19/2013 - 03:47 | 4168747 Pareto
Pareto's picture

+1 for The FED is a one trick bubble blowing pony.

Mon, 11/18/2013 - 22:51 | 4168166 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

OK, Ive had a burning question inside me that Ive been waiting to spring on the ZH braintrust.  I would ask Jim Sinclair but he will probably yell at me...

 

We have all heard about the coming bail-ins and how they will surely improverish anyone holding large bank/brokerage account balances or those expecting government pensions etc.

 

I understand the term bail-in to mean practically that the "investors" take losses rather than taxpayers and I hear tell that anyone in the above sentence is now classified as an investor.  Further I hear about bills like Dodd Frank that have moved deposit account holders back behind such specimens as derivative holders in the order of creditors.

 

So my question is, notwithstanding the moral outrage of our situation, does the widespread, top-down establishment of bail-in procedures, actually *increase* market confidence among professional players between now and the time of the big bang?  It seems like all the insiders have given themselves first dibs on our assets as they crank up a frenzied bubble atmosphere and invite us into the casino for one last go round.

 

Something I wonder about while we all wait around, becoming whatever it is we are becoming...

Mon, 11/18/2013 - 23:02 | 4168200 yogibear
yogibear's picture

The credit rating  should be lowered as well.

Tue, 11/19/2013 - 09:53 | 4169168 cashtoash
cashtoash's picture

It is time for Yellen to issue a few trillion bit coins. 

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