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Strategies & Market Trends : US Inflation and What To Do About It -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (1038)	7/11/2019 11:51:19 AM
From: RetiredNow	Read Replies (1) \| Respond to of 1504

Not sure it is. corporate debt is over rated by the ratings agencies. Gundlach estimated a couple months ago that something like 50% of BBB rated debt should actually be rated junk. If they start to rerate these corporates, that will cause an avalanche in corporate bond sales, which will kill their prices. I guarantee the next QE will be in corporate bonds, if this happens. Basically, we have a lot of walking dead zombie companies out there that are not even profitable and they are floating on a sea of debt and low interest. When their junk is rerated, they won't be able to afford the interest and they will go under, if they can't sell equity to fund cash flows. It won't be pretty. I've said this for a long time now. Nothing from the financial crisis was resolved. It was just swept under the rug. So the next downturn could be very ugly. The good thing is that our banks are solvent and strong right now, but not sure how long they can keep that up in a low interest rate environment. Also, another area that could blow up is pensions. They have been living on the 7-8% return dream and that has not materialized. The unfunded pension liability in corporations and cities and states is truly monstrous. Just wait until the socialists demand the government fund that shit.