Corporate and Buyout Debt Levels In the Red Zone – This Time It’s Different, Right?

The Wall Street Journal, which didn’t exactly cover itself in glory with its reluctant and initially Pollyanna-ish coverage of the 2007-8 LBO and debt market meltdowns, is now sounding the alarm – on its front page no less:

Risky Loans Surge in U.S., Overseas

(Website headline: Leveraged Loans Are Back and on Pace to Top Pre-Financial Crisis Records)

Investors worry this could pressure financial markets if global economic expansion fades

Lending to the most highly indebted companies in the U.S. and Europe is surging, a development that investors worry could pressure financial markets if the global economic expansion starts to fade.Volume for these leveraged loans is up 53% this year in the U.S., putting it on pace to surpass the 2007 record of $534 billion…

Sure, the piece is essentially just LCD’s data through the WSJ’s megaphone, but it’s a step in the right direction, and, really, they had to get the worry beads out in the wake of Toys R Us.

Wolf Richter crunches his own numbers in a more insightful piece from yesterday (Corporate Mirage: Debt out the Wazoo, Sales Languish, Stocks Soar) that illustrates the absurdity of the current debt/sales/share price trend lines, and is well worth reading.


In short, debt jumped 35% since the prior peak before the Financial Crisis, as sales rose only 12% over the same period, but stocks have doubled from the highly inflated levels at that time.

It’s all part of the phenomenon of repressed yields and cheap credit: Companies are borrowing large amounts of money to buy back their own shares and to buy out each other, instead of funding investments in productive activities. The hype around these share repurchases and M&A fires up stock prices and contributes to the current stock price bubble, but does nothing for the economy and leaves corporate America and share prices in a very precarious position.

So is Toys R Us the Tribune of the new unwinding? As Richter writes, “Hype works, until it doesn’t.”


Lord Henry Wotton on Second Marriages

“When a woman marries again, it is because she detested her first husband. When a man marries again, it is because he adored his first wife. Women try their luck; men risk theirs.”

– Picture of Dorian Gray

Truer words….


Philip Marlowe on Smartphones

“Twenty-four hours a day somebody is running, somebody else is trying to catch him. Out there in the night of thousand crimes people were dying, being maimed, cut by flying glass, crushed against steering wheels or under heavy tires. People were being beaten, robbed, strangled, raped, and murdered. People were hungry, sick; bored, desperate with loneliness or remorse or fear, angry, cruel, feverish, shaken by sobs. A city no worse than others, a city rich and vigorous and full of pride, a city lost and beaten and full of emptiness. But since everyone has their snouts buried in their fucking smartphones, no one notices.”

– Raymond Chandler, The Long Goodbye


Siddhartha Himself Would Succumb to Disgust

Buddhists are supposed to acknowledge that suffering is universal, not strive to make it so. Assholes.

Myanmar protesters try to block aid shipment to Muslim Rohingya

SITTWE, Myanmar (Reuters) – Buddhist protesters in Myanmar threw petrol bombs to try to block a shipment of aid to Muslims in Rakhine state, where the United Nations has accused the military of ethnic cleansing, before police fired in the air to disperse them.

via NPR:

Softbank Boss Joins Elon Musk in Warning of Artificial Intelligence’s “Existential Threat”

From Dealbook:

FromThe Singularity is coming, Masayoshi Son says.

The founder of SoftBank, the Japanese conglomerate, had the business world chattering on Monday night with his speech at the Appeal of Conscience Foundation. (DealBook is the first to report on it.”)

His main thrusts:

• The Singularity, when artificial intelligence finally outstrips that of humans, will replace huge swaths of jobs.

• The number of sentient robots on Earth will rival the number of humans.

via Morning Agenda: Masayoshi Son Warns of the Singularity – The New York Times

Sam Harris’s conversation with computer scientist and neuroanatomist Stuart Russell explores the issue of developing AI that’s compatible with human well-being in a useful way.