Debts 02 - Govt etc (Nov 16 - Dec 24)

[winston]

Margin Debt Is Declining. Are The Bulls In The Clear?

by Lance Roberts

“Of the total shares outstanding of the SPDR S&P 500 ETF, only 2.6% were out on loan to short-sellers this week, the lowest since early October 2018, and down from 7% during the summer,according to IHS Markit data cited by Bloomberg.

Meaning that short-sellers who want to short the entire market, and not specific companies, are worried that the market will break out, powered by a Brexit deal or a miraculous US-China trade deal as per presidential tweet, or whatever, and rip their faces off if they’re short the market.”

Source: IWB

https://www.investmentwatchblog.com/mar ... the-clear/

[winston]

Chinese corporate debt is the ‘biggest threat’ to the global economy, says Moody’s chief
by Weizhen Tan

While corporate debt is a “fault line in the financial system and the broader economy,” Moody’s Chief Economist Mark Zandi flagged Chinese indebted companies as the “biggest threat.”

A similar warning by Fitch Ratings last week said that private companies in China have defaulted on their debts at a record pace this year.

In an October report, the ratings agency put it down to a tightening of credit as a result of the government’s deleveraging efforts.

Source: CNBC

https://www.cnbc.com/2019/12/17/chinas- ... KW,3QAQJ,1

[winston]

China Corporate Debt Woes

Business tycoon and Alibaba founder Jack Ma recently offered an insight into the level of corporate debt in the mainland.

He said that he had received five calls in a single day from friends to borrow money last month, while also revealing that in one week, 10 friends were trying to sell their properties to get out of difficulties.

This shows that China's corporate bond problem is very serious because there are very few people who have access to Ma's private phone number in the mainland and even fewer whom Ma would be willing to accept phone calls from.

These must have been people of a certain stature who could pick up the phone and call Ma in the hope that the billionaire would reach out and help them.

So if what Ma said was true, then there must have been five super rich people in financial distress as well as ten tycoons who could save themselves but were also starting to get into trouble.

Source: The Standard

[behappyalways]

World Bank warns of global debt crisis following the fastest increase in borrowing since the 1970s
https://www.cnbc.com/2020/01/09/economy ... eases.html

[behappyalways]

The Approaching Debt Wave
https://www.project-syndicate.org/comme ... su-2020-01

[winston]

Debts

Before the last financial crisis, US government debt was ‘only’ about $9 trillion. It’s nearly tripled since then.

The Federal Reserve’s balance sheet prior to the last crisis was $850 billion. It ballooned to $4.5 trillion, more than 5x as much.

This means that we could see US government debt reach $40 to $50 trillion, and the Fed’s balance sheet exceed $20 trillion.

Could that possibly have negative implications for the US dollar? You bet.

Source: Sovereign Man

[winston]

US Debts

According to credit-ratings agency Standard & Poor's ("S&P"), 120 U.S. companies defaulted on their debt so far this year... including 61 in the second quarter.

That's the highest number of quarterly defaults since 80 companies defaulted in the second quarter of 2009.

The list of companies filing for bankruptcy so far in 2020 includes 112-year-old gas-engine maker Briggs & Stratton... gym operator 24 Hour Fitness... vitamin and supplement retailer GNC... Ascena Retail, owner of women's apparel stores Ann Taylor, Loft, and Lane Bryant... and Lord & Taylor, the country's oldest department store.

So far this year, S&P has downgraded the credit of roughly 2,100 companies. That's already more than any year on record.

To me, 2020 looks a lot like 2008, the year before the default rate peaked in the last financial crisis. But 2020 is already much worse. And we still have three more months to go.

The U.S. high-yield default rate is about 6% today. That means only 6% of all corporate borrowers have defaulted over the past year.

But S&P is forecasting that the high-yield default rate will more than double to 12.5% by next June. That would be the highest default rate since the Great Depression in 1932.

S&P's current "pessimistic" forecast projects the default rate to reach 15.5%. That means another 250 to 300 companies could go bankrupt over the next year. So as you can see, the storms will likely get much worse.

The high-yield credit spread – the difference between the average yield of so-called "junk" bonds and the yield of similar-duration U.S. Treasury notes – tells us how much risk that investors are pricing in bonds at any given time.

When the spread is low, investors aren't concerned at all about defaults. When it's high, they're worried about getting paid back.

The spread has fallen to around 500 basis points ("bps") today. It's once again below its long-term average of around 600 bps, after rising to more than 1,000 bps in late March... a few weeks after the World Health Organization declared COVID-19 a global pandemic.

The excessive debt balances can only continue to rise for so long. Eventually – and in most cases, suddenly – companies collapse. Unsuspecting investors will be wiped out.

Source: Daily Wealth

[behappyalways]

Who cares about credit ratings? Italy can borrow money for free
https://edition.cnn.com/2020/10/14/inve ... index.html

[winston]

US$2.2 trillion virus relief blows US fiscal deficit past US$3 trillion

The final tally for the budget deficit in fiscal 2020 came to US$3.13 trillion, more than triple last year’s shortfall of US$984 billion and double the previous record of US$1.4 trillion in 2009.

Most of the damage to this year’s budget came due to the CARES Act, a US$2.2 trillion spending package that included extra unemployment compensation.

The fiscal year ended with government debt at just under US$27 trillion, all but US$6 trillion of which is held by the public.

The cost to service all that debt for the year came to US$522.8 billion, which actually was the lowest total since 2017.

Source: The Standard

https://www.thestandard.com.hk/breaking ... 3-trillion

[winston]

US plays catch up with China in debt crises

by Kevin Xu

Zombies now account for nearly 20 percent of those US firms. They've added almost US$1 trillion of debt to their balance sheets, bringing total obligations to US$1.36 trillion.

China's 10-year government notes are set to drop for a seventh month in November, on track for the longest retreat since 2007. The decline has pushed the benchmark yield to 3.32 percent, set for the highest since May 2019.

Meanwhile, China's holdings of US Treasury Securities decreased to US$1.06 trillion in September, the lowest since February 2017.

Source: The Standard

https://www.thestandard.com.hk/section- ... ebt-crises