Posted on 08/24/2005 7:22:04 AM PDT by thinking4me
Companies have issued record volumes of junk bonds in recent years, spurred by low interest rates and a wave of leveraged buyouts. And yield-hungry investors were snapping up the riskier debt...... Default for most investors means big losses, a function of industry problems or economic downturn. But among Wall Street's restructuring advisors, bad times mean good business..... Poised to rise A strong economy and the lowest interest rates in decades pushed default rates for non-investment grade, or junk bonds down to 1.25 percent last year -- a seven-year low and below the historic 5 percent average...... But banks noted that the latest vintages of debt are also riskier. More bonds have been issued at lower, more speculative grades that imply a greater chance of default ..... Even now, when overall default rates are low, advisors are busy dealing with some struggling industries....
(Excerpt) Read more at money.cnn.com ...
I am sorry but if you still do not see the link, look very hard and follow the money trail up to THE FEDERAL RESERVE... this is why The Founding Fathers prohibited central banking. Play with the interest rates for political purposes - buying votes - and pay it later, eventually. It always gets back at you. What for? To show the voters that the economy is BOOMING??? Laughable!!
Yet, somehow there were periods of excess liquidity before the Fed existed.
Yet, somehow there were periods of excess liquidity before the Fed existed.
YEAH, SURE... it even goes back to the ancient empire of china... are they stupid or do they have a plan, which is to bankrupt completely 80% of masses on a regular basis???
I think this article is misleading.
Individuals are highly leveraged, as are financial companies, and then there is the prolifigate U.S. government (Bush never met a spending bill he didn't like).
But... I don't think corporations are overleveraged. In fact, I believe they have been paying off debt.
What this article is saying is that there has been a big move by low grade corporations to issue junk bonds to the crazy hedge funds that are sucking it up with no abandon, as shown by the lack of a risk premium for this debt. Only dummies are buying junk bonds now, as they are not getting compensated for the default risk.
When our currency drops (not if), our manufacturing companies should be well poised to expand with the increased demand brought on by a 30 percent off sale on American goods and labor, and brought on by relatively low levels of debt.
What the coastal people do with their extra condo's when interest rates rise is hard to guess, but our industrial base should make a resurgence. Ditto for the federal government trying to roll over high priced debt.
Looks like it will be "back to work" and "back to saving" for the U.S. But there should be plenty of industrial jobs that laid off social workers can find.
Hoppy
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