Corporations Are Defaulting On Their Debts Like It’s 2008 All Over Again

[mick silver]

Corporations Are Defaulting On Their Debts Like It’s 2008 All Over AgainSource: Michael Snyder, Guest Post (http://theeconomiccollapseblog.com/archives/corporations-are-defaulting-on-their-debts-like-its-2008-all-over-again)


http://theeconomiccollapseblog.com/wp-content/uploads/2016/04/Corporate-Debt-Defaults-Public-Domain-460x325.jpg (http://theeconomiccollapseblog.com/archives/corporations-are-defaulting-on-their-debts-like-its-2008-all-over-again/corporate-debt-defaults-public-domain)

The Dow closed above 18,000 on Monday for the first time since July. Isn’t that great news? I truly wish that it was. If the Dow actually reflected economic reality, I could stop writing about “economic collapse” and start blogging about cats or football. Unfortunately, the stock market and the economy are moving in two completely different directions right now. Even as stock prices soar, big corporations are defaulting on their debts at a level that we have not seen since the last financial crisis. In fact, this wave of debt defaults have become so dramatic that even USA Today is reporting on it (http://www.usatoday.com/story/money/markets/2016/04/18/defaults-hit-highest-level-since-09-bust/83003002/)…

Get ready to step over some landmines, investors. The number of companies defaulting on their debt is hitting levels not seen since the financial crisis, and it’s not just a problem for bondholders.
So far this year, 46 companies have defaulted on their debt, the highest level since 2009, according to S&P Ratings Services. Five companies defaulted this week, based on the latest data available from S&P Ratings Services. That includes New Jersey-based specialty chemical company Vertellus Specialties and Ohio-based iron ore producer Cliffs Natural. Of the world’s defaults this year, 37 are of companies based in the U.S.
Meanwhile, coal producer Peabody Energy (BTU) and surfwear seller Pacific Sunwear (PSUN) this week filed plans for bankruptcy protection. Shares of Peabody have dropped 97% over the past year to $2 a share and Pacific Sunwear stock is off 98% to 4 cents a share.
A lot of big companies in this country have fallen on hard times, and it looks like bankruptcy attorneys are going to be absolutely swamped with work for the foreseeable future.
So why are stock prices soaring right now? After all, it doesn’t seem to make any sense whatsoever.
And it isn’t just a few bad apples that we are talking about. All across the spectrum, corporate revenues and corporate earnings are down. At this point, earnings for companies on the S&P 500 have plunged a total of 18.5 percent (http://davidstockmanscontracorner.com/yelling-stay-in-a-burning-theater-yellen-ignites-another-robo-trader-spasm/) from their peak in late 2014, and it is being projected that corporate earnings overall will be down 8.5 percent (http://wolfstreet.com/2016/04/03/corporate-revenues-earnings-in-the-first-quarter-will-suck/) for the first quarter of 2016 compared to one year ago.
As earnings decline, a lot of big companies are getting into trouble with debt, and we have already seen a very large number of corporate debt downgrades. In recent interviews, I have been bringing up the fact that the average rating on U.S. corporate debt has now fallen to “BB”, which is already lower than it was at any point during the last financial crisis (http://theeconomiccollapseblog.com/archives/corporate-debt-defaults-explode-to-catastrophic-levels-not-seen-since-the-last-financial-crisis).
A lot of people don’t seem to believe me when I share that fact, but it is absolutely true.
One of the big reasons why corporate debt is being downgraded is because a lot of these big companies have been going into enormous amounts of debt in order to buy back their own stock. The following comes from Wolf Richter (http://wolfstreet.com/2016/04/18/financial-engineering-share-buybacks-backfire-like-before-last-2-stock-market-crashes/)…

Downgrades ascribed to “shareholder compensation,” as Moody’s calls share buybacks and dividends, have been soaring, according to John Lonski, Chief Economist at Moody’s Capital Markets Research (https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189042) . The moving 12-month sum of Moody’s credit rating downgrades of US companies, jumped from 32 in March 2015, to 48 in December 2015, and to 61 in March 2016, nearly doubling within a year.
The last time the number of downgrades attributed to financial engineering reached 61 was in early 2007. It would hit its peak of 79 in mid- 2007, a few months before the beginning of the Great Recession in Q4 2007. At the time, stocks were on the verge of commencing their epic crash.
When corporations go into the market and buy back their own stock, they are slowly cannibalizing themselves. But we have seen these stock buybacks soar to record levels for a couple of reasons. Number one, big investors want to see stock prices go up, and so big investors tend to really like these stock buybacks and will generally support corporate executives that wish to engage in doing this. Number two, if you are a greedy corporate executive that is heavily compensated by stock options, you very much want to see the stock price go up as well.
So the name of the game is greed, and stock buybacks have been fueling much of the rise in U.S. stock prices that we have been seeing recently.
However, the truth is that nothing in the financial world lasts forever, and this irrational bubble will ultimately come to an end as well.
Earlier today, I am across an article that included a comment from Michael Hartnett of Bank of America Merrill Lynch. He believes that there are a lot of parallels between what is happening today and the period of time that immediately preceded the bursting of the dotcom bubble (http://www.businessinsider.com/market-repeating-mistakes-of-1999-bubble-2016-4)…

Back then, as could be the case today, a bull market & a US-led economic recovery was rudely interrupted by a crisis in Emerging Markets. The crisis threatened to hurt Main Street via Wall Street (the Nasdaq fell 33% between Jul-Oct 1998, when [Long-Term Capital Management] went under). Policy makers panicked and monetary policy was eased (with hindsight unnecessarily). Fresh liquidity combined with apocalyptic investor sentiment very quickly morphed into a violent but narrow equity bull market/bubble in 1998/99, one which ultimately took valuations & interest rates sharply higher to levels that eventually caused a “pop”.
Like Hartnett, I definitely believe that a major “pop” is on the way, although I would like for it to be delayed for as long as possible.
Someday we will look back on these times with utter amazement. It has been absolutely incredible how the financial markets have been able to defy economic reality for so long.
But they can’t do it forever, and according to a brand new CNN survey (http://money.cnn.com/2016/04/18/news/economy/us-economy-c-grade/index.html?iid=hp-stack-dom) Americans are becoming increasingly pessimistic about where the real economy is heading…

In a new CNNMoney/E*Trade survey of Americans who have at least $10,000 in an online trading account, over half (52%) gave the U.S. economy as a “C” grade. Another 15% rated the economy a “D” or “F.”
This gloom persists despite the fact that the stock market is on the upswing again. The Dow topped 18,000 (http://money.cnn.com/2016/04/18/investing/dow-jones-tops-18000/index.html?iid=hp-toplead-dom)Monday for the first time since July 2015.
If some Americans think that the U.S. economy deserves a “D” or an “F” grade right now, just wait until they see what is in our immediate future.
Personally, I give our economy an “A” for being able to maintain our unsustainable debt-fueled standard of living for as long as it has. Somehow we have managed to consume far more than we produce for decades, and the largest debt bubble in the history of the planet just keeps getting bigger and bigger and bigger.
Of course we are very much living on borrowed time at this point, but I truly hope that the bubble economy can keep going for at least a little while longer, because nobody should want to see what is coming afterwards.


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[ximmy]

Something is brewing... and it isn't strong drink.

[Joshua01]

Every day we get just a tad closer

[mick silver]

as I travel I am seeing more big box store with going out of business sign flying in the air plus just look at all the to big to fail companys going under are just moving to taco land are oversea now

[mick silver]

Big Banks Fail to Give Regulators Plans to Manage Next CollapseSource: AP (http://www.allgov.com/news/controversies/big-banks-fail-to-give-regulators-plans-to-manage-next-collapse-160418?news=858676)

Five of the biggest U.S. banks have six months to get their disaster plans in shape. That's the message regulators issued Wednesday after giving the banks failing grades for the strategies they would deploy if they tumbled into bankruptcy.
JPMorgan Chase (https://www.jpmorganchase.com/), Bank of America (https://www.bankofamerica.com/), Wells Fargo (https://www.wellsfargo.com/), Bank of New York Mellon (https://www.bnymellon.com/) and State Street Bank (http://www.statestreet.com/home.html) were cited by the Federal Reserve (http://www.allgov.com/departments/independent-agencies/board-of-governors-of-the-federal-reserve-system?agencyid=7427) and the Federal Deposit Insurance Corp. (http://www.allgov.com/departments/independent-agencies/federal-deposit-insurance-corporation-fdic?agencyid=7426) for "living wills" that are "not credible" or insufficient for an orderly restructuring if needed. The banks were required to submit the plans outlining how they would reshape themselves in the event of failure.
The government exercise is aimed at avoiding a repeat of the taxpayer bailouts of "too-big-to-fail" banks during the 2008 financial crisis. Having to salt away bigger capital reserves against unforeseen losses could eventually cut into banks' profitability. They might try to compensate by pinching consumers with higher fees for services.
But for now, the regulators' thumbs-down represents merely a ripple for a mostly robust U.S. banking industry. They wouldn't face any government sanctions, such as new capital-building mandates or forced sales of assets, for at least six months.
The five banks, with a total of about $5.6 trillion in assets, were among eight Wall Street behemoths whose plans were evaluated. The other three banks — Citigroup (http://www.citigroup.com/citi/), Goldman Sachs (http://www.goldmansachs.com/) and Morgan Stanley (http://www.morganstanley.com/) — got less-than-glowing reports from the regulators, though not as severe.
The big banks have been working on their plans for four years. The regulators already put them on notice in mid-2014 that they had to correct serious deficiencies.
The regulators gave them an Oct. 1 deadline to fix the problems or face possible "more stringent" requirements. That could include ordering the banks to beef up their capital cushions against unforeseen losses. If the regulators still weren't satisfied, banks eventually could be forced to sell off assets — but not before two years.
That helps explain why Wall Street seemed unruffled by news of the regulators' action, and stocks of major banks rose in U.S. trading after the announcement by the agencies. They closed moderately higher. JPMorgan gained 4.5 percent to finish at $61.94. Bank of America picked up 3.7 percent to $13.76.
Investors view the banks' shortcomings in their "living wills" mainly as a housekeeping problem rather than a sign of fundamental financial weakness.
The big banks are in strong financial shape and are facing no threat of collapse. They sit on sturdy bases of capital that the regulators ordered them to shore up in recent years. The banking industry as a whole has recovered steadily since the financial crisis, racking up climbing quarterly profits.
At the same time, it's been a tough slog for big banks in recent months. Profits and share prices have fallen as their loans to energy companies have soured and the Fed signaled it will slow the pace of interest rate increases, which hurts bank profits. The financial industry is the worst performing sector of the S&P 500 this year.
The "living will" assessments are part of the regulators' effort to avoid another taxpayer bailout of Wall Street banks in a crisis and to end the marketplace perception that the government would step in and rescue them. Under the 2010 overhaul law, the FDIC has the authority to seize and dismantle big financial firms that could collapse and threaten the broader system. The banks' "living wills" could serve as guidelines for possible breakups by the government.
"We are going to do everything we can to fix this issue," JPMorgan (https://www.jpmorgan.com/country/US/en/jpmorgan) CEO Jamie Dimon said in a conference call with reporters.
The biggest U.S. bank, with some $2 trillion in assets, reported Wednesday that its first-quarter profit fell more than 8 percent from a year earlier, hurt by weak performance in its investment business. Still, the earnings came in better than analysts had expected, and JPMorgan's stock advanced.
Any potential breakup of JPMorgan would be at least two years away, if regulators continued to find the bank's plan to be deficient. And any capital that JPMorgan, or the other banks, would have to raise to meet the regulators' demands would also be at least six months away. In a conference call with investors, JPMorgan's finance chief Marianne Lake said any costs tied to meeting regulators' requirements would likely be modest.
Complex legal structures are a big factor in the problems the regulators had with the banks' plans. JPMorgan's plan, for example, relies on moving cash and holdings away from its overseas subsidiaries, a feat that could be difficult in a global financial crisis.
Read More.... (http://www.allgov.com/news/controversies/big-banks-fail-to-give-regulators-plans-to-manage-next-collapse-160418?news=858676)

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[mick silver]

Big Banks Fail to Give Regulators Plans to Manage Next CollapseSource: AP (http://www.allgov.com/news/controversies/big-banks-fail-to-give-regulators-plans-to-manage-next-collapse-160418?news=858676)

Five of the biggest U.S. banks have six months to get their disaster plans in shape. That's the message regulators issued Wednesday after giving the banks failing grades for the strategies they would deploy if they tumbled into bankruptcy.
JPMorgan Chase (https://www.jpmorganchase.com/), Bank of America (https://www.bankofamerica.com/), Wells Fargo (https://www.wellsfargo.com/), Bank of New York Mellon (https://www.bnymellon.com/) and State Street Bank (http://www.statestreet.com/home.html) were cited by the Federal Reserve (http://www.allgov.com/departments/independent-agencies/board-of-governors-of-the-federal-reserve-system?agencyid=7427) and the Federal Deposit Insurance Corp. (http://www.allgov.com/departments/independent-agencies/federal-deposit-insurance-corporation-fdic?agencyid=7426) for "living wills" that are "not credible" or insufficient for an orderly restructuring if needed. The banks were required to submit the plans outlining how they would reshape themselves in the event of failure.
The government exercise is aimed at avoiding a repeat of the taxpayer bailouts of "too-big-to-fail" banks during the 2008 financial crisis. Having to salt away bigger capital reserves against unforeseen losses could eventually cut into banks' profitability. They might try to compensate by pinching consumers with higher fees for services.
But for now, the regulators' thumbs-down represents merely a ripple for a mostly robust U.S. banking industry. They wouldn't face any government sanctions, such as new capital-building mandates or forced sales of assets, for at least six months.
The five banks, with a total of about $5.6 trillion in assets, were among eight Wall Street behemoths whose plans were evaluated. The other three banks — Citigroup (http://www.citigroup.com/citi/), Goldman Sachs (http://www.goldmansachs.com/) and Morgan Stanley (http://www.morganstanley.com/) — got less-than-glowing reports from the regulators, though not as severe.
The big banks have been working on their plans for four years. The regulators already put them on notice in mid-2014 that they had to correct serious deficiencies.
The regulators gave them an Oct. 1 deadline to fix the problems or face possible "more stringent" requirements. That could include ordering the banks to beef up their capital cushions against unforeseen losses. If the regulators still weren't satisfied, banks eventually could be forced to sell off assets — but not before two years.
That helps explain why Wall Street seemed unruffled by news of the regulators' action, and stocks of major banks rose in U.S. trading after the announcement by the agencies. They closed moderately higher. JPMorgan gained 4.5 percent to finish at $61.94. Bank of America picked up 3.7 percent to $13.76.
Investors view the banks' shortcomings in their "living wills" mainly as a housekeeping problem rather than a sign of fundamental financial weakness.
The big banks are in strong financial shape and are facing no threat of collapse. They sit on sturdy bases of capital that the regulators ordered them to shore up in recent years. The banking industry as a whole has recovered steadily since the financial crisis, racking up climbing quarterly profits.
At the same time, it's been a tough slog for big banks in recent months. Profits and share prices have fallen as their loans to energy companies have soured and the Fed signaled it will slow the pace of interest rate increases, which hurts bank profits. The financial industry is the worst performing sector of the S&P 500 this year.
The "living will" assessments are part of the regulators' effort to avoid another taxpayer bailout of Wall Street banks in a crisis and to end the marketplace perception that the government would step in and rescue them. Under the 2010 overhaul law, the FDIC has the authority to seize and dismantle big financial firms that could collapse and threaten the broader system. The banks' "living wills" could serve as guidelines for possible breakups by the government.
"We are going to do everything we can to fix this issue," JPMorgan (https://www.jpmorgan.com/country/US/en/jpmorgan) CEO Jamie Dimon said in a conference call with reporters.
The biggest U.S. bank, with some $2 trillion in assets, reported Wednesday that its first-quarter profit fell more than 8 percent from a year earlier, hurt by weak performance in its investment business. Still, the earnings came in better than analysts had expected, and JPMorgan's stock advanced.
Any potential breakup of JPMorgan would be at least two years away, if regulators continued to find the bank's plan to be deficient. And any capital that JPMorgan, or the other banks, would have to raise to meet the regulators' demands would also be at least six months away. In a conference call with investors, JPMorgan's finance chief Marianne Lake said any costs tied to meeting regulators' requirements would likely be modest.
Complex legal structures are a big factor in the problems the regulators had with the banks' plans. JPMorgan's plan, for example, relies on moving cash and holdings away from its overseas subsidiaries, a feat that could be difficult in a global financial crisis.
Read More.... (http://www.allgov.com/news/controversies/big-banks-fail-to-give-regulators-plans-to-manage-next-collapse-160418?news=858676)

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[singular_me]

there will be no money to build trump's wall... it is going to be EPIC, corporations are the black holes of the economy. And since banks are corporations...

---------------------------------

Fed Issues an Ominous Warning to JPMorgan Chase and Leaders Flock to Secret Meetings
http://www.activistpost.com/2016/04/fed-warns-jpmorgan-secret-meetings.html

[Ponce]

Meanwhile?.........they want to do business with Cuba? hahahhaahhahahh.......... Castro was smart by telling them to get the hell out of Cuba..... remember that Cuba stop taking yanky dollar back in......2002?

By the way.....silver will be for trading and not for selling......if you sell the government will get you.....for them water and silver will be the future oil.

V

[mick silver]

Source: Zero Hedge (http://www.zerohedge.com/news/2016-04-19/unequivocally-great-news-america-gas-prices-are-soaring)

Judging by the exuberant equity market, it is not 'low' gas prices, but high gas prices that are "unequivocally good" for America - after all the market is ultimate arbiter of how the average joe feels, right? However, if you drive a car - or gas-hungry truck - you may have noticed something in the last month or so - gas prices at the pump are up almost 25% from the mid-Feb lows, the biggest surge since July 2009.
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/04/19/20160419_gas_0.jpg (http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/04/19/20160419_gas.jpg)
While stocks love higher gas prices, as the chart suggests, however, US Macro 'fundamentals' do not and the last time gas prices soared this far this fast marked the cyclical top in US macro data, tumbling almost non-stop for 2 years before QE2 was unleashed.