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Corporate Debt Flashes Warning Signs Similar To The Sub-Prime Mortgage Crisis

Mac Slavo
January 21st, 2019
SHTFplan.com
Comments (27)

In 2008, when the United States was flung into recession, the culprit was the sub-prime mortgages.  People without the ability to repay the money, borrowed to buy houses only to lose it all once the bubble burst.  Now, the corporate debt crisis is poised to cause a similar recession.

Although student loans debt has skyrocketed to a disturbing $1.5 trillion, some economists are saying the $1.2 trillion corporate debt could be capable of producing a more disastrous scenario.  The borrowers in this current credit bubble aren’t homeowners taking out mortgages. They’re hundreds of United States companies with weaker credit ratings (many of them well-known like Uber and Burger King) who are taking out so-called leveraged loans, according to a report by the Los Angeles Times. These loans are used to fund corporate deals and are of a big concern to financial experts.

“Any fair-minded look at the leveraged loan market should cause significant alarm by anybody concerned about financial stability and the inevitable upcoming economic downturn,” said Dennis Kelleher, president of Better Markets, a group that advocates stricter financial regulation. “You put all these pieces together, it’s a witches brew.”

Former Federal Reserve Chairwoman Janet Yellen also went public this fall with her worries about what she called a “huge deterioration” in the standards for those loans, which make it easier for indebted companies to take on more debt. “If we have a downturn in the economy, there are a lot of firms that will go bankrupt, I think, because of this debt,” she told the Financial Times. “It would probably worsen a downturn.”

But regulations and new laws won’t fix the fact that people and companies and the government itself (who writes and enforces the laws about loans and debt) will not quite borrowing money.  The problem is the behavior and reliance on debt in the American culture, not the lack of laws.

“Someone’s going to get hurt there,” Dimon said on a Tuesday earnings call, referring to leveraged loan losses if a recession hits. And some have already suffered because of their massive debts. Toys R Us loaded up on leveraged loan debt when it was purchased in a leveraged buyout in 2005 by private equity firms Bain Capital and KKR & Co. and real estate investment trust Vornado Realty Trust. The debt burden led the toy retailer to file for bankruptcy protection in 2017 after it was unable to refinance the debt.

The debt crisis doesn’t stop at massive credit card debt or student loans. About two-thirds of U.S. companies have enough debt that independent credit raters have them categorized as a higher risk to repay than companies with so-called “investment-grade” ratings, which makes them off-limits to many institutional investors.

The Looming Economic Collapse: The $250 Trillion Dollar Worldwide Debt Crisis

There will be a point when this terrifying debt bubble (everything bubble) will burst.  It could happen in 6 months or 6 years, but the best way to prepare is to ensure you aren’t a part of it.  Pay off as much of your debts if you can to help turn what will be catastrophe into a mild inconvenience. 

How To Best Prepare Yourself For The Coming Financial Crisis

 

President Trump is Breaking Down the Neck of the Federal Reserve!

He wants zero rates and QE4!

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The Finger is on the Nuke Button | Future Money Trends

Author: Mac Slavo
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Date: January 21st, 2019
Website: www.SHTFplan.com

Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.

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27 Comments...

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  1. Asshat says:

    My state is adding a tax fee whatever you wanna call it to Netflix. So it’s going from $8 a month to $14. Any monthly payment can be increased but one time buys cannot be increased if you buy now before the price goes up due to market conditions. Looking like Netflix is going for me. The greed of the state has hurt Netflix. They can’t win against me I’m the master of going without. People really need to cut back and watch how they try to raise a fee or tax on some other monthly expense. It’s usually some where you cannot escape like your car registration or what they call technology fees. I can make up anything to charge you fees. Like oxygen use tax cus you breathe air and emit carbon dioxide. Taxachusetts is adding a tax to uber users. What will they think of next gun insurance for liability. Greed knows no limits. Do you think they would legalize recreational marijuana if you didn’t buy it from a place that taxes it. Now if you get marijuana from a dealer that is untaxed and a crime like moonshine. I don’t burn but stoners were to stupid to realize legal dope wasnt a good idea.

  2. Old Guy says:

    Let them fail. I didn’t lose anything in 2008. I don’t think It will impact me this time.

    • rellik says:

      OG,
      The only thing I lost in 2008 was all respect for the rights and lives of American Democrats.

      • The Deplorable Renegade says:

        Rellik, I NEVER had respect for the dems period! LOL!

        • Maranatha says:

          I did. Labor Democrats historically came to the aid of Ronald Reagan. Dixiecrats made up the majority of Kentucky and helped Republicans over and over from 1980 on…before waking up and mass converting to the Republican side. They “walked away” long long ago…during Newt’s Republican Revolution and Contract with America.

          Now, Democrats are not reasonable normal people with a majority rule political bent and a heavy dose of states rights theory.

          Nope. Now Democrats became Dumbocrats and are kooks, perverts, weirdos, Marxists, Socialists, Anarchists like Antifa, etc. The party who once were states rights proponents became FEDERALISTS???? Thomas Jefferson and Andrew Jackson must be turning over in their graves.

          • Maranatha says:

            There was a time from 1980-2000 where the vast bulk of Republicans and Democrats had so much common ground as MODERATES that they were virtually indistinguishable.

            The conservative Republicans were in the minority but the moderates generally supported them with the exception of globalism and free trade amd some monetary policy.

            Democrats just went to Hell in a handbasket. They went completely off the rails like a runaway train.

  3. John Stiner says:

    People without the ability to repay the money, borrowed to buy houses only to lose it all once the bubble burst.

    That is really not an accurate representation.

    People used their houses like ATM machines and took out equity lines of credit and refinancing with the expectation that house prices would continue to rise at massive rates.

    California was the worst. Texas was not affected because cash out refinancing was illegal in Texas until 2006 so home prices are not artificially inflated in Texas.

  4. John Stiner says:

    could happen in 6 months or 6 years, but the best way to prepare is to ensure you aren’t a part of it. Pay off as much of your debts….

    Buy Gold and Silver. When collapse happens, this will be the only way to preserve your wealth.

    • Can’t eat gold or silver…

      • rellik says:

        CB,
        Correct!
        They are no better than the casino stock market,
        as PM prices are “set” by some mysterious
        group of people. Price should be related to the cost of production and the utility of that production.
        #50 of rice is worth far more than an ounce of
        gold in SHTF situations.

        • Johnny Paytoilet says:

          Have some metals. John S. is right. Also, have essential commodities, too. Thus, CB, The Deplorable, Laura Ann & Rellik are right. In essence, you need to be balanced. Very important, have what it takes to protect it all including medical supplies. SHTF scenarios have been on my mind for well over 40 years. When it hits, expect the worse & then some. Also, keep yourself physically fit & healthy.

        • Anonymous says:

          The London Gold Fix. It’s fixed alright. Fixed to benefit the real criminals.

      • CB: gotcha, besides after the y2k farce ended silver and gold tanked. I invest in thinks that are of real use incl hand tools, ammo, etc. some used as barter.

    • The Deplorable Renegade says:

      JS, if you’re already debt free then stay that way. I’m that way and prepped with several years’ worth of supplies so no worries here.

  5. “People without the ability to repay the money, borrowed to buy houses only to lose it all once the bubble burst.”
    That’s correct….lenders like Countrywide were underwriting liars loans. The applicant simply had to write in whatever income was needed to get the loan. There were $12/hr fast-food workers getting loans on $250k houses. Then as the house went up in value, the same criminal lenders underwrote equity lines up to 125% of the value of the home. I know people that went to closing and actually received a large check to close (not writing a check for the DP). And when the sub-prime bubble burst, they all walked away from the homes. Many of them actually stripped the homes before vacating, taking even more $$$ with them on the way out. Others simply lived in the homes without paying the mortgages, knowing evictions were months or even years away due to the backlogs. The whole thing was criminal fraud….and yet not one executive level bankster when to prison. Manzilo (the CEO of Countrywide) was hit the hardest of all of them with a hefty $80 million dollar fine. But guest what? This criminal made over $200 million in bonuses, netting him a cool $120 million.
    One think I’ve learned about thieves is that they will continue to steal if they get away with it. And these bastards got away with it. And so they are going to do it again…accept this time the heist will be 10 times bigger.!!!!!

  6. Old Guy says:

    People without the ability to repay the money, borrowed to buy houses only to lose it all once the bubble burst.— those folks didn’t lose anything. They made a gamble that somwhow inflation would let them flip that house and they could make money. however it wasn’t really ever theirs to lose. when you buy on credit until you make that very last payment its not yours. Until its paid in full you are nothing more than a glorified renter.

  7. Maranatha says:

    I think having recognizable gold and silver coins will be very tradable immediately after a collapse and either could have infinite value lobg term as none will be made for a decade after a collapse.

    BUT a lot of rich people will have worthless jewelry and watches and trying to trade because they have no food supplies. If you are trading food supplies or ammunition, you opening yourself to theft by an angry mob who will overrun you. Don’t be tempted and lay low.

    Let all the craziness play out and then go harvest what is leftover.

    • Beaumont 2.0 says:

      I’m a fan of objectivity. I like that you can hold something tangible.

      Though, the market is an abstract idea, arbitrary, and emotional.

      Metals are a short-to-medium-term hedge against inflation but not particularly helpful, during hyperinflation or when the govt sets the prices artificially-low.

      See how it is spent, in other, failed states, for a working example.

      Or, for a religious example, consider what the Bible says about gold and silver, in the last days.

      • Maranatha says:

        The latest news out of South Africa is they are out of gold. That is financing the Marxist government of the ANC. Aww too bad. It’s what they get for attacking innocent Afrikaaners and dispossessing them of their farms.

        • Maranatha says:

          PROOF
          ht tps://www.bloomberg.com/news/articles/2018-12-09/south-african-gold-industry-enters-final-phase-of-slow-death

          What do you think will happen to old prices as a result?

          Realize that South Africa is a perfect test case for what happens when nations run out of water and are ethnically diverse. It means an open race war.
          ht tps://news.nationalgeographic.com/2018/02/cape-town-running-out-of-water-drought-taps-shutoff-other-cities/

          South Africa will demonstrate collapse theory and scenarios like no other nation has ever faced.

  8. Sheep Dog says:

    Prepping like it is going out of style………

  9. Informed Republican says:

    I am retired now with a paid off home, no mortgage, no car payment, no debt, but I’m hearing that Americans impacted by the government shutdown are starting to fall behind in their mortgage payments. Many have recently exhausted their savings after a month of zero income.

    Seems lately most people don’t have more than 3 months in savings because its pretty hard to save these days when you are overtaxed and then there’s inflation too. But Americans are too busy hating each other and fighting to see that. The only thing the government has done a good job at is keeping us divided, pitted against each other.

    The inevitable, starting to fall behind in their mortgages next month, watch how fast the government snaps up their houses (under made up LLC’s) when the federal workers are in default by only 6-8 months. They are like vultures watching and waiting to scoop up some good properties, many within a 50 mile radius of Washington DC where the bulk of federal workers live. It’s also very expensive to live there but many of the properties are just what the government and Trump would love to get their hands on at a discount.

    Meanwhile, while the cats away the mice will play.

    Last week hundreds of illegal immigrants tunneled under the border to enter the country illegally, drugs are pouring into and the drug movers are having themselves a field day. None of our ports are secure.

    The airports aren’t secure either because people can’t work for free. Love or hate the TSA we need them at the airports. Some TSA employees are not gropers who abuse their power. Some Americans have to travel by plane and they are not safe with the worldwide knowledge that security is lax due to the shutdown, leaving us wide open for a disaster or tragedy. Visitors are overstaying their visa because the guard is off duty.

    The problem with the border wall is that Trump never had a solid plan to begin with. He didn’t do his due diligence homework regarding the wall before he went on stage to make empty promises and mistakenly thought that such an unrealistic feat could be accomplished for a few billion.

    Both sides want secure borders but one knows it can’t possibly be accomplished for a few billion and neither Dems or Repubs want to foot the bill as we’re already taxed into oblivion as it is by those who keep us distracted and divided.

    Trump insisted and promised Mexico would pay for the wall with no solid plan in place or timeline when he made us these promises and even when Mexico said they would not pay. Trump has been making promises he could not, and in the end will not end up keeping. Bad strategy right there.

    We should be pulling together as Americans instead of fighting each other at every corner and expecting positive results. We should be pulling together against the government, the president and his inept revolving door administration, not fighting each other. The hatred among Americans is astounding.

    Both sides want security; one knows it will not happen for a few billion and eventually taxpayers will be paying for it. The other side says build the wall, yes it will happen, start building the wall anyway. One side knows the government will be asking for more wall money all over again within a year, the other side doesn’t care.

    If Trump secures this funding and ends the shutdown, guaranteed we’ll just go through this all over again before this time next year when the first rounds of funds are exhausted because the border wall can’t be properly built for only a few billion. It’s not realistic.

    He didn’t have a solid plan in place outlining costs and time frames for the wall, just an unrealistic lip service fantasy in mind that drew crowds and cheers, and now we are divided over that. Exactly how they want us— divided.

    • Beaumont 2.0 says:

      It is said, too cutely, that Democrats are the party of the Klan and slavery.

      But, Republicans are the party of Reconstruction (affirmative action) used as a punishment, against the South.

      Republicans, telling us about the good jobs numbers of leftist demographics, in the face of demographic replacement and extinction, is losing the plot, if WASP masculinists are supposed to practice identity politics, too.

      Where is the return of the social contract, for the normals, first and and foremost.

  10. Beaumont 2.0 says:

    I think that debt is created, arbitrarily, as a form of busy work or fool’s errand, also, that the social Darwinist is akin to an apex predator.

  11. Maranatha says:

    Sorry, we are well past the point of Republicans getting along with maniacal Dumbocrats who are calling for the deaths of white men, Christians,veterans, whatever. They have demonized us, so when they come a-calling expecting a pushover, Kentuckians will whip their heads back. The gloves are coming off.

    Hollyweird is so detached from reality that crazed soyboys and bulldykes think they stand a chance against harden veterans who are armed to the teeth. Come on, it willbe a slaughter.

    The standard strategy was to save up assets and have a portion that is very liquid so you could get to it quickly and that needed to equal a year of bills. Meanwhile you paid down your debt as much as possible which meant you sacrificed when young. People did without as young couples and then could have a little extra when retired. Most people do it the opposite way and cry about it.

    • Maranatha says:

      These idiotic millennials have such a weak sense of self-identity that they care that anonymous strangers give them “likes” and count up proudly how many facebook “friends” they have and how many “subscribers” they have. Be for real.

      What matters is how many ancestral skills you have mastered. How well armed you are? How many pushups and situps and pullups can you do? How far can you carry a backpack? Can you fight and crush the enemy? How you ambush, use sabotage, create diversions, create a crossfire, flank the enemy, etc.

      Age does not matter…especially when it came out that millennial men on average have equal grip strength to millennial women! How could they ever look in the mirror and not see abject FAILURE screaming back? They can’t even use can openers.

      • Maranatha says:

        PROOF
        htt ps://www.washingtonpost.com/news/wonk/wp/2016/08/15/todays-men-are-nowhere-near-as-strong-as-their-dads-were-researchers-say/?utm_term=.185e2e7aab6d&noredirect=on

        “To look at it another way: In 1985, the typical 30-to-34-year-old man could squeeze your hand with 31 pounds more force than the typical woman of that age could. But today, older millennial men and women are roughly equal when it comes to grip strength.”