The Good, The Bad, The Ugly (Vis-à-Vis Corporate Balance Sheets, That Is)

When it comes to predicting the next recession (and by the way, you don't have to be a "permabear" or a doomsayer to know that the cycle will eventually turn - cycles always turn, that's why they're "cycles") choosing the "right" indicator is something of a parlor game for economists, analysts and pundits. Everyone has their favorite go-to warning sign and they range from the old standbys (e.g., the yield curve) to sometimes entirely esoteric indicators that purportedly backtest well. If you're

Join institutional investors, analysts and strategists from the world's largest banks: Subscribe today for as little as $7/month

View subscription options

Or try one month for FREE with a trial plan

Already have an account? log in

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

6 thoughts on “The Good, The Bad, The Ugly (Vis-à-Vis Corporate Balance Sheets, That Is)

  1. H thanks for the great article.

    The dynamics in this article will be the main drivers for policy decisions over the next decade. I’m glad you mentioned the bank loan markets. I’ve studied them quite a bit, and they’ve been exploited (as many debt instruments have) as we all search relentlessly for yield. Inflows into these funds were tremendous in 2017, resulting in a steep premium which eroded the return one would expect from the coupon float . Nothings cheap anymore.

    I’m also glad that you pointed out the “exploitation” of long term corporate issued debt. (Fig 4) Corporations knew a good deal when they saw it. I don’t know the average maturity breakdowns of the debt they issued post 2009, but assuming a lot of it is 7-10 year, it’s going to start rolling off the books now. They got a great deal on all this issuance. They are lucky long term rates are fairly anchored,

    Corporate debt Credit spreads have been decimated in the last 10 years. Any blow out on corporate credit spreads and/or an unanchoring of the ever resilient long term yield (as you pointed out) will be a very tough pill to swallow if/when refinancing occurs.

    Excessive Debt creates so much fragility in Financial markets.

    Tesla is very lucky given that a lot of their junk rated debt (11B?) doesn’t mature until 2024.

    Once again, thanks for the article.

    “Firms have also lengthened the typical maturity of their debt. The share of short-term debt, which includes commercial paper and non-mortgage corporate loans, is now 28%, nearly an historical low”

  2. It’s interesting to me that so many people are consumed with forecasting the next recession. There’s no iron law of finance that says substantial market declines are caused by recessions. Sometimes causation goes the other way, and sometimes there’s no relationship at all.

  3. It’s interesting to me that when I borrow money and if I miss one(1) minute in arrears (never have) I would be hounded to the ends of my life. Really folks, people talk about this just like the CB’s of the world want them to talk about it, like does anyone think in this lifetime or the next this shit will be paid back???

    Jerome, what say you, “#$#%$$ &%$$ $$$$R !@#$#@$$ ^&^%$ %^%%%, (*&^%#!#### __++&*%^$”. Kuroda your turn, what say you, “——– ——- — —— ——- —- — — —” Ok that was enlightening great, super Mario, what say you, “++++++ ++ ++ ++++++ ++++ +++++++++++++++++++.” Fantastic. Thanks for the insight.

  4. “Everyone has their favorite go-to warning sign” … mine is cramer. He said on his show today a recession is coming because of three T’s: Two-year yield, Ten-year yeild, and Tarrifs …

NEWSROOM crewneck & prints