Thursday, March 26, 2020

Vultures circling debt. Cash is king. Rich getting Richer.

Crashes have a predictable boom/bust pattern.
Bubbles will burst.
Booms help the rich get richer.
Busts help the rich get richer.

Rich 1% have lots of money, especially after years of stock market booming
they got capital gains and commissions from buying and selling stocks, bonds,...

Rich 1% have sold off most of their stocks to idiot doctors and workers 401Ks and pension funds CalPers idiot portfolio managers.

Rich 1% got rich from "corporate finance" fees allowing businesses to borrow and invest into
more and more cruises, casinos, airplanes, hotels, movies,… that spread germs and make people sick.

Eventually something will happen "black swan event" that will cause a crash,
Deep in debt companies and people's debts will not be payable,
and businesses that over-borrowed will be nearly defunct.

Their bonds and loans will be sell for pennies on the dollar as everybody except the rich lack money and frightened.

Rich 1% buy that debt for pennies on the dollar.
Then Rich 1% Shylocks use the court system to attack borrowers for year after year until they extract all the dollars they can from the poor borrowers.
Poor borrowers pay the taxes to keep the court system running to attack those poor borrowers.

Pattern established in all previous crashes,
for example I got out of the market well before the 1987 bubble crash.
Other big bubbles, tech 1990s crashed in 1999-2000,
then 2001 9/11 crash
2008 mortgage derivatives crash
Now Covid coronavirus crash.

You never know when the crash will happen or why.
But it is easy to sense when you are in a boom or a bust.
And easy to see who is getting rich off the boom/bust cycle.

Lots of news stories:

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The amount of distressed debt in the U.S. has quadrupled in less than a week to nearly $1 trillion,
reaching levels not seen since 2008
as the collapse of oil prices and fallout from the coronavirus shutters entire industries across the globe.

The total is probably even higher,
because the calculation excludes debt of small-to-medium sized companies whose loans trade rarely, if at all.

The coronavirus pandemic has caused the worst sell-off since the global financial crisis and deepened stress in credit markets.

Driven by some of the lowest oil prices since the early 2000s,
the amount of distressed bonds has surged to the highest level since April 2009.

"What we are seeing now is fast and violent,"
unlike the gradual sell-off in the 2007 and 2008 crisis

If the virus isn't suppressed, even more distress is possible,
"The worst is yet to come,"

Distressed debt describes the borrowings of companies that are perceived to be under significant financial pressure,
and often suggests there's considerable risk that
the debtholders won't get paid everything they're owed.

As a global recession looms and businesses remain under forced closures,
more issuers are likely to end up in similarly dire situations.

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