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Old 06-11-2020, 09:55 AM
 
1,381 posts, read 737,946 times
Reputation: 3543

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https://www.theatlantic.com/magazine...llapse/612247/

Google the author...he's legit. This time, unlike 2008 CDOs, it's about CLOs. Lot's of information in the article, but here's some snips:

"...Just as easy mortgages fueled economic growth in the 2000s, cheap corporate debt has done so in the past decade, and many companies have binged on it...."

"...But that AAA rating is deceiving. The credit-rating agencies grade CLOs and their underlying debt separately. You might assume that a CLO must contain AAA debt if its top layer is rated AAA. Far from it. Remember: CLOs are made up of loans to businesses that are already in trouble.

So what sort of debt do you find in a CLO? Fitch Ratings has estimated that as of April, more than 67 percent of the 1,745 borrowers in its leveraged-loan database had a B rating. That might not sound bad, but B-rated debt is lousy debt. According to the rating agencies’ definitions, a B-rated borrower’s ability to repay a loan is likely to be impaired in adverse business or economic conditions. In other words, two-thirds of those leveraged loans are likely to lose money in economic conditions like the ones we’re presently experiencing. According to Fitch, 15 percent of companies with leveraged loans are rated lower still, at CCC or below. These borrowers are on the cusp of default...."
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Old 06-11-2020, 12:07 PM
 
Location: California
819 posts, read 564,890 times
Reputation: 1230
Great article. Its exasperating to see banks back to their old ways.
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Old 06-11-2020, 01:48 PM
 
1,381 posts, read 737,946 times
Reputation: 3543
It is. Lots of information, lots of big companies named who are in trouble.
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Old 06-11-2020, 01:51 PM
Status: "Trump is orange buffoon" (set 13 days ago)
 
Location: Berkeley, Denver, CO USA
14,925 posts, read 22,237,947 times
Reputation: 25243
Jay Powell will not let the banks collapse.
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Old 06-11-2020, 02:00 PM
 
1,381 posts, read 737,946 times
Reputation: 3543
Powell, and his view, are discussed in the article. What makes you think Powell's current thinking is better than Greenspan's thinking was? (Also discussed)
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Old 06-11-2020, 03:36 PM
 
Location: Heart of flyover America
643 posts, read 253,951 times
Reputation: 1222
The financial system is on the brink of implosion. The big banks as we know them will collapse without a doubt. No amount of worthless debt will prevent the global financial system from facing a well-deserved implosion.

Without massive debts and derivatives, banks will go back to their original role: financing trade, commerce, and production. Even the global central banks are liable to collapse and go away. Or at the very least, have a very much diminished role.
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Old 06-11-2020, 09:32 PM
 
10,547 posts, read 4,580,802 times
Reputation: 2153
Quote:
Originally Posted by Taggerung View Post
The financial system is on the brink of implosion. The big banks as we know them will collapse without a doubt. No amount of worthless debt will prevent the global financial system from facing a well-deserved implosion.

Without massive debts and derivatives, banks will go back to their original role: financing trade, commerce, and production. Even the global central banks are liable to collapse and go away. Or at the very least, have a very much diminished role.
Ain't gonna happen. Didn't happen post 2008, won't now. The Fed is simply too strong.

Just Google 29 Trillion - and then apply that to your ideas on inflation and tax payer money.
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Old 06-11-2020, 09:58 PM
 
Location: Washington Park, Denver
8,082 posts, read 7,505,926 times
Reputation: 9105
Quote:
Originally Posted by Hoonose View Post
Ain't gonna happen. Didn't happen post 2008, won't now. The Fed is simply too strong.

Just Google 29 Trillion - and then apply that to your ideas on inflation and tax payer money.
He doesn’t have ideas, he has beliefs.
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Old 06-12-2020, 05:20 PM
 
Location: Myrtle Creek, Oregon
14,331 posts, read 13,895,434 times
Reputation: 23243
I think most of this article is clickbait, but the commercial credit sector has been in trouble since before the pandemic. I think it will be much more critical when applications for new credit and are denied in both the commercial and consumer markets.

The most recent projections I have seen are that the world GDP will drop 5% in the next year, with US GDP falling even more. Bailing out the megabanks will not fix that. It's likely to lead to a major restructuring of the US economy, with no assurance that massive changes will solve the problem.
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Old 06-12-2020, 05:39 PM
 
Location: Washington Park, Denver
8,082 posts, read 7,505,926 times
Reputation: 9105
Quote:
Originally Posted by Larry Caldwell View Post
I think most of this article is clickbait, but the commercial credit sector has been in trouble since before the pandemic. I think it will be much more critical when applications for new credit and are denied in both the commercial and consumer markets.

The most recent projections I have seen are that the world GDP will drop 5% in the next year, with US GDP falling even more. Bailing out the megabanks will not fix that. It's likely to lead to a major restructuring of the US economy, with no assurance that massive changes will solve the problem.
Making sure the banks are solvent is critical. Without the banks facilitating the flows of capital, the economy grinds to a halt.
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