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Distressed-Debt Losses Worst Since 2008 - "It's Not Just Energy, It's Everything"
When buy the dip doesn't work. "Most distressed situations have not worked out in 2015," exclaims one distressed hedge fund manager facing significant losses on the year, "It wasn’t just energy. It was anything with loads of leveraged debt on it." As Bloomberg reports, distressed hedge funds dropped 5% in 2015 through October, putting them on pace for their worst year since 2008, when they lost 25%... and November isn’t looking like it will be much better.
Ugly!!
Hedge funds that specialize in the debt are grappling with their worst declines in seven years. As Bloomberg reports, funds managed by Knighthead Capital Management, Candlewood Investment Group, Mudrick Capital Management and Archview Investment Group all posted losses through October. And year-end bonuses at Wall Street desks that trade distressed debt could be slashed by a quarter, Options Group said.
After six years of easy-money central-bank policies kept over-leveraged companies afloat and left scant opportunities for traders who profit off the market’s scrap heaps, a rout in commodities prices in 2014 presented what had seemed like a perfect chance to buy again. Instead, those prices only declined further this year, causing the debt of everyone from oil drillers to coal miners to fall deeper into distress. As the losses intensified, gun-shy investors pulled back from almost anything that smacked of risk, spreading the losses to industries from retail to technology.
...
November isn’t looking like it will be much better. A Bank of America Merrill Lynch index of distressed debt is down almost 8 percent this month as the average price of bonds in the benchmark dropped to 57 cents on the dollar, from as high as 75.6 cents in February.
Hope remains though...
"Now is the time you should be putting capital to work, anticipating that it’s going to be messy for the next six months or so" in the energy industry said one manager.
And firms are raising capital for the turn...
"The increasing fragility of certain business models is beginning to be reflected in a number of ways, including wider credit spreads, lower liquidity, and a material and sudden expansion of the stressed and distressed debt universe," Canyon Capital wrote in a letter dated Oct. 19, explaining its rationale for the new pool.
“This has been a tough year for distressed,” one manager concluded...
“There’s a lot of people that won’t have the ability to stick around. They won’t see the eventual rebound. You have to have staying power.”
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Cheer up it's almost christmas
When the whole market sits upon debt, one bad debt quickly turns into a pile of bad debt.
^^^
and "just a quarter of a point interest rate increase" is doucing that pile in gasoline & lighting a match
Looks bullish to me
Janet Yellen's response to Ralph Nader's open letter to the FED was interesting.
2008 - Candidate Obama: "Main Street First! No more Wall Street Bailouts!" - *Trickle UP Economics*
2009 - President Obama: "We must save Wall Street in order to save Main Street" -
*Trickle Down Economics*
2015 - FED Chair Yellen in response to Nader: Paraphrasing "We must save Wall Street in order to save Main Street" -
*Trickle Down Economics*
Who's in charge? Who changed their "belief"...
http://www.commondreams.org/views/2015/10/31/open-letter-chairwoman-yell...
Fuck Christmas..
( Knock! knock! knock! )
KRAMPUS! come on in....
"Christmas is a “charade" - Pope Francis
Ok, he's halfway there with rebuilding his credibility..with me anyway..."Religion is a “charade” is the final step...take it Francis!
I'll bet, a 1000 years ago, many of the "educated" would have bet that religion would have died by now.
Deflation + Leveraged debt is kryptonite for the central banksters.
Let it rain down upon them !
Canyon Capital is now in the SUV business https://www.youtube.com/watch?v=7ZeFDe44Ddo
It should be worse. Anybody buying with a 2008 or pre-2008 mindset:
1) Can't expect to see growth pickup after experience of past 7 years compared to 2008 when investors at least expected a rebound
2) Inventory values depressed and falling
3) Plant & equip worth less since capex was cut back
but the stock market is up, so it must not really mean anything right? just ignore it an dprior to anything meaningful happening, we will warned ahead of time.
http://www.bloomberg.com/bw/stories/2007-11-04/the-even-keel-economy
in november 2007, real estate was something heppening 'over there', as the mkt had just hit a new all time high in October, a month prior to this article link, and on 11/5 had sunk a mere 5% from the high.
we know today that real estate issues morphed and then brought everything with it....what big issues are currently underway, that b/c the mkt is near all time highs, obviously do not matter? --collapse of oil sector; emerging emerging mkt currency crisis; yoy decline in sales and earnings in sp500; negative swap yields(?); very low labor participation; what else?
imo the junk bond/ energy area will have more and continuous repercussions and is closely linked to the emerging mkt currency issues. 1998 asian contagion PLUS dotcom bust ? a slowing slowing economy with rates at 0 (no powder), smells like a long recession--death by a thousand cuts, that may morph into a stock market that gags down 20-30% then climbs 10% several times...until a whole generation swears off 'the stock market'. its like the millenials are the 1930's people who only saw banks/wall st as the source of all our problems.
Credit markets are a lot like gay orgies. One guy gets HIV and suddenly everyone has HIV. Credit contagion, bitches!