{"id":13762,"date":"2015-10-23T18:49:27","date_gmt":"2015-10-23T23:49:27","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13762"},"modified":"2015-10-23T18:49:27","modified_gmt":"2015-10-23T23:49:27","slug":"this-is-why-its-going-to-get-even-tougher","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13762","title":{"rendered":"This Is Why It\u2019s Going to Get Even Tougher"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2015\/10\/23\/this-is-why-its-going-to-get-even-tougher\/\" target=\"_blank\">This Is Why It\u2019s Going to Get Even Tougher<\/a><\/h3>\n<p>The third quarter was tough for US corporations. Worse than the prior two quarters. They got waylaid by weak global demand and lack of pricing power. The easiest way to increase revenues and profits is to raise prices, so via inflation, but that strategy isn\u2019t working when consumers don\u2019t have the additional income to pay for higher prices.<\/p>\n<p>Then there\u2019s the \u201cstrong dollar.\u201d On Thursday, Draghi evoked more QE and even more negative deposit rates, which\u00a0<a href=\"http:\/\/wolfstreet.com\/2015\/10\/22\/draghi-speaks-euro-falls-off-chart-stocks-soar-despite-layoffs-shrinking-revenues-and-evil-strong-dollar-that-just-got-a-heck-of-lot-stronger\/\"><u>eviscerated the euro and made the dollar a heck of a lot stronger<\/u><\/a>. And so many US corporations are now reporting declining revenues.<\/p>\n<p>It isn\u2019t just the energy sector. For the 142\u00a0<em>non-energy<\/em>\u00a0companies that have reported Q3 earnings so far, revenues dropped 3.0% year-over-year, according to Moody\u2019s\u00a0<a href=\"https:\/\/www.moodys.com\/researchdocumentcontentpage.aspx?docid=PBC_185316\"><u>Credit Markets Review and Outlook<\/u><\/a>. Operating income of these non-energy companies fell 2.7%. In this environment, companies try to maintain their bottom line by cutting costs.<\/p>\n<p>\u201cResults such as these weigh against expecting much of a pick-up by either hiring activity or capital expenditures,\u201d Moody\u2019s warns gloomily. Both have been dreary recently.<\/p>\n<p>Cheap money is no longer readily available to riskier borrowers. In the third quarter, bond issuance by junk-rated companies plunged 38% from a year ago. Yields rose as the spread between high-yield bonds and Treasuries soared. And in October, according to\u00a0<a href=\"http:\/\/www.highyieldbond.com\/\"><u>S&amp;P Capital IQ\u2019s LCD<\/u><\/a>, it has been even worse: just seven junk-bond deals through Thursday, for a measly total of $3.7 billion.<\/p>\n<p>Leveraged loans are in a similar quandary. These loans issued by junk-rated companies, often for special dividends to their private equity owners or for M&amp;A, are so risky for banks that regulators have been cracking down on them for two years. Banks usually sell them, either directly to funds or repackaged as Collateralized Loan Obligations (CLO). But during the Financial Crisis, banks got stuck with them. And now leveraged loan issuance is petering out.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This Is Why It\u2019s Going to Get Even Tougher The third quarter was tough for US corporations. Worse than the prior two quarters. They got waylaid by weak global demand and lack of pricing power. The easiest way to increase revenues and profits is to raise prices, so via inflation, but that strategy isn\u2019t working [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[124,7223,195,312,426,541,4926,4254,4255],"class_list":["post-13762","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-cheap-credit","tag-debt","tag-financial-crisis","tag-inflation","tag-moodys","tag-us-corporations","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13762","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13762"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13762\/revisions"}],"predecessor-version":[{"id":13763,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13762\/revisions\/13763"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13762"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}