Nope, no bubble here...
Despite the protestations of the Fed's Tarullo and Stein that credit markets are 'stretched' or 'in bubble territory', the printer-in-chief continues to force feed liquidity to the market and squeeze an ever-increasingly-anxious investing public into ever-more levered, covenant-lite, non-recourse, dismal-risk-adjusted-return loans just to garner more yield...
When even the heads of the organizations that the Fed is trying to save are stunned at the ease of the environment... perhaps you've gone too far...
Here is one such story from Steve Wynn - from the transcript of his most recent earnings call...
When asked about the recent financing, the outspoken Wynn goes to town...
Steve Wynn: "we finished our financing recently; The last tranche was a $750 million bond. We sold it at 5.09% with no covenants, non-recourse to the parent. And that brought our total financing for Cotai to $3.850 billion, at an average cost of 3.3%."
"Or to put it another way, we rented the $3.85 billion for $125 million."
Now on one hand, as a businessman, I’m thrilled. Never dreamed that we would see anything so tasty and wonderful as that.
On the other hand, it’s a reflection of questionable fiscal and monetary policy in the United States that is artificially depressed interest rates because of quantitative easing by the Fed, which is also sort of killing the value of the dollar and the living standard of the working people.
So the good news is, if you’re a high-class borrower with good credit rating, this is one of the most tastiest seasons of all time for 2 reasons. You’re borrowing money at artificially depressed rates. And you’re most likely going to pay them back with 85-cent dollars.
It’s a perfect storm for a businessperson unless you look at the truth of the matter and the impact it has on your customers and your employees.
And that’s a much darker story.
It doesn’t lend itself to a soundbite, but it’s — for every businessman in America and any economist that has their heads screwed on right, it’s an ominous situation.
But in terms of our moment in history, in commercial history...along with our colleagues in the industry, it’s nirvana.
Capital structure now is — these are mostly at the Venetian and the Wynn, things of beauty. They’re lovely, better than you could ever want. I mean, they’ve got everything, low interest rates, long maturities, low covenants. What else do you want? I mean, it’s great. If you look at it from our point of view.
But look at it from a consumers’ point of view or a working person’s point of view, who’s paying for all this cheap money? Well, right now, the Fed is.
I thought Bernie Madoff went to jail for that.”