Corporate Leverage

Where Are We In The Business Cycle: A Troubling Chart From Morgan Stanley

According to Morgan Stanley, 2017 will be a year in which odds of a boom and bust have materially increased, consistent with a late-cycle US environment. So late, in fact, that one look at the chart below shows the US cycle has not only plateaued but is now stalling and is turning over.

SocGen Presents The "Toxic" Difference Between QE In The US And Japan

In the US, easy central bank policy leads to greater corporate bond issuance and leverage, which in turn result in companies buying back their own equity - and to that extent QE is now residing on individual company balance sheets. In contrast, in Japan the BOJ simply buys Japanese equities directly. This difference is important

Inflation Is About To Spike Due To The "Base Effect"

In June, oil was still down 20% relative to a year prior. Last month, that year-over-year change had already risen to 0%. And if prices hold at current levels, oil will be up 45% at year-end. To repeat for emphasis, that’s -20% YoY to +45% YoY in the space of six months."

Hangzhou, We Have A Problem: "Over 71% Of New Chinese Loans Went To Fund Mortgages"

Last week, the IMF warned that China's growing debt "posed risks to financial stability." Here's why: new loans in August reached 948 billion yuan ($142 billion), more than double the figure a month before, data from the People's Bank of China showed. And the punchline: over 71% of the loans went to households, mainly to fund mortgages.

Never. Been. Higher.

"...am I in any way reassured that the Fed sees no bubbles? No, I am not. These dudes will never identify an asset bubble - at least before the event!"

Goldman Slams US Auto Sector As "Cycle Has Peaked", Downgrades Tesla

"We lower our Autos and Auto Parts coverage view to Cautious from Neutral. As we progress through the later stages of the US auto cycle, we expect a sales plateau through 2017 held up by increasing OEM incentives. Beyond this, we see US light vehicle sales mean reverting back toward normalized SAAR of 15mn from 2018 through 2020 as pent-up demand clears through"

$195 Billion Asset Manager: "The Time Has Come To Leave The Dance Floor"

"When the supposed solutions to the Fed’s dilemma are merely new “problems,” you know you are approaching the cycle’s end... long-term investing is predicated on not just knowing where the happening parties are during the reflationary parts of the cycle but more importantly, knowing when the time has come to leave the dance floor. In our view, that time has already come."

August Corporate Bond Issuance Breaks All Records Thanks To Relentless Demand For Yield

It has been a scorching August for the continental US, with the government predicting, for the first time on record, that every square inch of all 50 states is forecast to see above-average temperatures for the next three months. However, that is nothing compared to what is taking place in the blistering bond market, where new bond issuance is on pace to blow away all records.

US Futures Dip, European Stocks Slide After EU Court Slams Italian Bank Bailout Plans

After a head-scratching S&P500 rally - which not even Goldman has been able to justify - pushed stocks to new all time highs with seemingly daily record highs regardless of fundamentals or geopolitical troubles, overnight US equity futures dipped modestly, tracking weak European stocks as demand for safe haven assets including U.S. Treasuries and gold rises. Asian stocks outside Japan fall. Crude oil trades near $45 a barrel. 

When Brexit Has Come And Gone, The Real Problems Will Remain: A Reminder From Socgen

Whatever the outcome of the Brexit vote this week investors will still be facing the prospect of negative rates and negative yields on a huge range of bonds, massive corporate leverage with worryingly rising delinquencies and of course expensive equity markets and falling profits. And whilst the market preference for the status quo might be celebrated in the short-term, actually when the fog clears all of the problems will still be there.

 

The "Crazy Growth In Corporate Debt" Is Finally Noticed: Bloomberg Issues Stark Warning

One does not have to be financial wizard to to know that a firm which has to borrow more than it can generate from core operations is not a sustainable business model, and yet today's CFOs, pundits and central bankers do not. But more are starting to pay attention as the corporate debt pile hits epic proportions. As Bloomberg writes this morning, when it also issued a stark warning about the next source of credit contagion, while "consumers were the Achilles’ heel of the U.S. economy in the run-up to the last recession. This time, companies may play that role."

Quantitative Easing And The Corruption Of Corporate America

Since the turn of this century, debt-financed share buybacks have severely tested the character of those charged with growing publicly-traded U.S. firms. Should she ignore the potential for further QE-financed share buybacks to exact more untold economic damage, it would be akin to intentionally corrupting Corporate America. The time, though, has come for these wayward companies’ banker and enabler, the Fed, to hold the line, no matter how difficult the next inevitable test of their character may prove to be. It’s time for the Fed to defend the entire Union and end a civil war that pits a chosen few against the economic freedom of the many.