The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: Harshu Vyas	4/2/2022 6:39:58 AM
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OK, I usually like keeping my ideas to myself cos I'm quite paranoid but at this point in time, I think it's time to lay a few cards on the table. Here's what I think will happen: Sovereign bonds from EM countries (SL, Ethiopia, Congo) will default. It is important to keep in mind which are dollar-denominated and which aren't. As protectionism by the USA will rise and international trade will fall, countries possessing debts will find it increasingly difficult to meet terms agreed under more favourable economic conditions. We are already starting to see it happen. As for all of these mergers, most will fail. These mergers don't actually increase growth nor efficiency. If you know any bankruptcy lawyers, they're in for a treat! I know this sounds quite speculative but it's what I truly believe and in a market that is RIDICULOUSLY layered with speculation, what's the harm? Credit card delinquencies will start to creep up (at least in the UK, anyway) as inflation starts to run away. I don't know enough about CLO's and credit card securitisation* but I sure as hell will be watching companies such as AXP and JPM. (* I do know enough to make me worried.) Also, many long bonds were issued after the crash. 50 year bonds. Who has the time to invest in them? By the time they mature, the holder may be dead! What's the average company life expectancy? I wouldn't expect them all to be here. The same thing happened with governments. The assumption that governments won't go bust is a stupid one! VaR is still used today - the risk models used in the run up to the GFC. More derivatives and financial instruments have been brought into the picture as risk appetites soared during 2020 and 2021- look at wrapper contracts. I'm trying to work out life insurance companies- each year their annual statement gets significantly longer which means there are more numbers and footnotes to crunch. In 2014, they were only about 200 pages long. Believe me, when you get to one that's 1000 pages it's mid numbing especially if you think you've misread something or you don't understand... Companies with negative cashflow are in trouble when rates rise. Why? Banks and short term lenders control their future. You tell me what that means. Interesting stat: Housing +non-housing debt significantly higher than the peak of the GFC. It's not unexpected with ultra-low interest rates and QE. Outstanding derivatives roughly the same as before the GFC. IPO and merger market is a symptom of inflation but it will come crushing down. Much like crypto. Is there a future in crypto? Probably, but the time isn't now. I hope I've given you enough ideas to run off with.

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