Leveraged loans have been growing for the past decade.
A few months ago, we covered the growing corporate debt problem that is metastasizing throughout European corporations. Today, we congregate around this rag today to check in on the growing corporate debt problem here in the U S of A.
I introduce you to its cousin, CLOs. CLOs are built from leveraged loans -- sub-investment grade loans to companies with high levels of debt, or leverage.
— FariaLima Bitcoin [Jan/3➞₿🔑] (@FarialimaB) December 16, 2019
Leverage Loans have been rising in demand for the past decade. Doing a 10x from 2002 to 2018 pic.twitter.com/KS31FOVBxw
Maturing Debt
— FariaLima Bitcoin [Jan/3➞₿🔑] (@FarialimaB) December 16, 2019
In the next 3 or 4 years, the amount of speculative corporate debt maturing is gonna increase exponentially, forcing the American economy to deal with this pile o sticking debt while facing a, now everyday more clear, end of an economic cycle. pic.twitter.com/neayPLTcI5
Above are excerpts from the latter half of an interesting thread on US corporate debt, how it's grown over the last couple of decades and the exotic financial products that have been built around the loans. And as you can see, it looks like the world of banking and finance is back to its old ways of packaging up shit, getting ratings agencies to paint the shit with lipstick, call it a collateralized obligation (in this case, a CLO), and pawn it off on the market while reaping sweet sweet gainz from the fees accrued by selling these products. As our friend FariaLima points out, a large wave of this corporate debt is maturing over the next 3-4 years and that puts the Fed, which is dealing with a liquidity crunch in the repo markets at the moment, in a precarious position as they will probably have to step in and purchase some of this toxic debt if enough individual loans within the products prove to be below the investment grade granted to them by ratings agencies and begin defaulting on their obligations.
The mortgage crisis exported to corporate debt. Lovely.
Couple this mounting headache with the current repo headache the Fed is trying to work itself through and I find it very hard to imagine that the Fed doesn't continue to embark on QE4 for quite some time. (QE4 started in September.)
Speaking of the repo headache the Fed is trying to take care of at the moment, I recorded an episode of TFTC with Parker Lewis over the weekend. Parker is a Fed whisperer and does an incredible job of explaining what is currently going on with the repo markets. I highly recommend you freaks check it out when you get a chance if you're confused about the whole situation.
As the debt fueled system continues to become more fragile and as those in control of the system continue to loot from the masses, I find solace in the fact that we are able to find safety in sats.
Final thought...
The Sixers did not look good last night.
