B3 Debt is the New Black

6+

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


Record B3 Issuances Are Vulnerable To Downgrades And Default In An Economic Downturn [Forbes]

Over a decade of low interest rates and increased participation by non-banks has led to record high new issuance of B3 rated issuers.  44% of new issuers were rated B3 in 2018 in comparison to 22% in 2007, at the start of the last recession. 

Presently, “low rates support still-healthy EBITDA interest coverage. For example, in 2007 median interest coverage was 1.7x versus 2.0x in 2018 while leverage was 6.7x versus 7.0x respectively. Richer valuations and the cheap cost of capital have provided this group with a credit cushion.” 

Emphasis mine.

I’m not sure that people who aren’t immersed in this world realize how crappy B3 debt is. Or how much of it is getting pushed into the market. But here’s the thing.

So long as the Fed keeps its foot on the throat of interest rates … so long as the Fed embraces the Big Lie that near-zero interest rates prevent deflation rather than CAUSE deflation … there is no end to this.

What is financialization? What is the intentional blowing of an asset bubble? THIS.

Yay, capitalism!


6+

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You'll get two or three of these emails every week, and your email will not be shared with anyone. Ever. It's our effort to spread the word about what we're doing, and allow you to read more Epsilon Theory!

Notify of
1 Comment
oldest
newest
Inline Feedbacks
View all comments
Peter
1 year ago

Crack-up BOOM!

The Daily Zeitgeist

The Zeitgeist – May 7, 2021

By Ben Hunt | May 7, 2021 | 8 Comments

Our weekly digest on what we’re working on …

Including this article from the WSJ: Millions Are Unemployed. Why Can’t Companies Find Workers?

I dunno, if only there were some mechanism by which companies could entice people to work for them. Weird.

Read more

The Zeitgeist – April 30, 2021

By Ben Hunt | April 30, 2021 | 3 Comments

Here’s what we’re reading and working on this week at Epsilon Theory.

Read more

The Zeitgeist – April 19, 2021

By Ben Hunt | April 19, 2021 | 6 Comments

Here’s what we’re reading and working on this week at Epsilon Theory.

Read more

Hot and Cold

By Rusty Guinn | March 23, 2021 | 26 Comments

Most of us are under the impression that a protracted conflict within China will increase national unity.

Not this time.

Read more

A Change in the Water

By Ben Hunt | March 3, 2021 | 3 Comments

Increasingly, the common knowledge of our investment world – what everyone knows that everyone knows – is that inflation is a problem and you should be focused on it.

Read more

Danish Food-Safety Expertise for the Win

By Ben Hunt | February 10, 2021 | 23 Comments

WHO leadership continues to be necessary part of the Chinese narrative machine.

It’s more than a disgrace. It’s more than a humiliation of the people who do good and important work through WHO.

It’s a betrayal of the entire world.

Read more

DISCLOSURES

This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.

Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.