When the head of the Fed comes out and says it also, you know it's a wrap... Bernanke said Subprimes are good, then said Subprimes were contained few months before Lehman... The Fed chairs are notoriously known to lie and that everything is always good, so for Powell to come out and even acknowledge some of it... https://markets.businessinsider.com...siness-debt-a-moderate-risk-2019-5-1028218876 Many older articles late 2018 detailing situation on the exact numbers, but this article highlights a speech he gave Monday evening. The central bank chief warned overly indebted firms could endure "severe financial strain" if the economy weakens, and a highly leveraged business sector could exacerbate an economic downturn as companies are forced to lay off workers and reduce investment. However, the build up of business debt "does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm to households and businesses should conditions deteriorate," Powell said. "In public discussion of this issue, views seem to range from 'This is a rerun of the subprime mortgage crisis' to 'Nothing to worry about here,'" he added. "At the moment, the truth is likely somewhere in the middle." Powell acknowledged similarities between the recent spike in business debt and the lending boom that preceded the global financial crisis. Debt has surged to historic highs and outpaced growth in borrowers' incomes, lenders have loosened their underwriting standards, and much of the borrowing is financed outside the banking system.
ok.... so? they learned the lesson from 2008 right? imagine, if QE was done at the first sign of the 2008 disaster, would we still have the disaster? yes this sounds nuts lol.... but they do have the unlimited liquidity to wash over any problems... the problem in 2008 was they hesitated and the market had to tank and a few big firms had to go under and numerous homes had to foreclose lol. so yeah sure right now the corporate debt is huge... but, if apple can issue debt for 3%, and buy back stocks that are yielding 6.5%, who can blame them... you can only blame the stupidity of the bond buyers, they are brain washed by their financial advisers that 'bonds are safe'... so corporations have been doing a massive 'knowledge arbitrage' here... no brainer to borrow money to buy back shares. so we small investors just need to join the game.
THAT IS F***IN INSANE!! O_O Borrowing at high yield and spending it on stock buy backs!?! That's like your broker charging 20% and you putting it all in google.
lol you been living under a rock.. it's been going on for how many years already.. 'high yield' maybe a misnomer though... as it usually refers to junk... but most sp500 bonds are investment grade... so e.g. apple's corporate bonds are yielding what.. 3% ish... but their forward earning yield is at 6.8% the real insanity imo is in the bond buyers... who in their right mind would forego something yielding 6.8, but choose 3 instead.... from the same company. on a broader scale.. LQD is yielding 3.5%, but SP500 is yielding 5.8%... see who are insane here... can't be all these companies borrowing at 3.5 to buy 5.8 right... free money, why wouldn't they.
When you say apple is yielding at 6.8%.. You're not talking about P/E.. Apple's P/E was like at 15x? Are you talking about profit %?
https://finviz.com/quote.ashx?t=aapl take these with some salt lol but shouldnt be too far off.. the forward p/e is 14.61 so 1/14.61 is 6.8% the forward earning yield. http://www.wsj.com/mdc/public/page/2_3021-peyield.html here you get the forward p/e of the indexes, and you can calculate the forward earning yield. I don't care about the divs.... recent years the trend has been moving away from divs in favor of buy backs, because of the tax defer (share holders would need to pay tax on divs, but buy backs just push up the share price, which means capital gains only when you sell).
Dude, about what you said before, I doubt 99% of the people walking around know about the borrowing and buy backs.. Only "sophisticated" investors know. Even the technical traders wouldn't know. It's all great, but now I'm looking for the short. And thanks for the answers, you're the best. I do take Finviz with a grain of salt as their P/E's are off for some stocks, so why would I believe other info is accurate.
Nothing to do with Lefty or Righty. Bush, Obama and now Trump are using us savers to bail out the speculators since 2008-09.
Long bond, long corporate bond yields are still at or near historical low. Companies that have plenty of free cash flow would be foolish not to load up on low cost loans. It is like if you can afford to, you should refinance your home at a 30 year fixed rate mortgage at rate below 3.5% a few years back. It is like free money after factoring inflation. The only time in recent memory us mom and pop retails got a break.
What's the big deal if these "shadow banks" go under? These are just speculative business right? So why does government need to help them? In 2008, the banks that provide liquidity was in trouble. But these are just private businesses.
%% And like Jim Rogers noted ,[paraphrase] long fund managers start yellin' @ fed head Yellin; most likely same with J Powell. Don't fight the fed; unless its like 2008 + surprise rate cut means not much + downtrend resumes.LOL,