{"id":31869,"date":"2018-03-03T09:21:06","date_gmt":"2018-03-03T14:21:06","guid":{"rendered":"http:\/\/olduvai.ca\/?p=31869"},"modified":"2018-03-03T09:21:06","modified_gmt":"2018-03-03T14:21:06","slug":"from-bling-to-plonk-an-update-on-the-debt-mountain","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=31869","title":{"rendered":"From Bling to Plonk \u2013 An Update on the Debt Mountain"},"content":{"rendered":"
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From Bling to Plonk \u2013 An Update on the Debt Mountain<\/a><\/h3>\n<\/div>\n
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Serenely Grows the Debtberg<\/strong><\/p>\n

We mentioned in a recent post that we would soon return to the topic of credit spreads and exotic structured products. One reason for doing so are the many surprises investors faced in the 2008 crisis. Readers may e.g. remember auction rate securities<\/a>. These bonds were often listed as \u201ccash equivalents\u201d on the balance sheets of assorted companies investing in them, but it turned out they were anything but. Shareholders of many small and mid-sized companies learned to their chagrin that quite a bit of this \u201ccash\u201d had for all practical purposes evaporated when the markets for these bonds suddenly froze.<\/p>\n

\"\"<\/a>Surprise and shock at the sudden emergence of exotic securities in unexpected places at an inconvenient moment.<\/p>\n

We have regularly chronicled the growing insanity in bond markets over the past few years in these pages, since we feel quite certain that debt will once again prove to be the straw that breaks the bubble\u2019s back, so to speak. The massive surge in \u201ccov-lite\u201d bond issuance in the corporate junk bond universe almost speaks for itself, as does the popularity of \u201cfrontier market\u201d government bonds or bonds issued by parastatal entities in these markets (\u201cfrontier markets\u201d are what the POTUS colorfully refers to as \u201cshitholes\u201d).<\/p>\n

The same applies to the resurgence in CLO issuance. Investors in these products often employ up to 10:1 leverage; reportedly banks are eagerly supplying the funds, since back-testing clearly shows that nothing bad ever happened to these carefully over-collateralized cesspools of potential deadbeat debt \u2013 and as everybody knows, that means nothing bad will<\/em> ever happen. Just as there was never<\/em> supposed to be a nationwide collapse in home prices, this is basically the next doubleplus-certain thing, which means there is little choice but to slap an AAA rating on most of these securities.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

From Bling to Plonk \u2013 An Update on the Debt Mountain Serenely Grows the Debtberg We mentioned in a recent post that we would soon return to the topic of credit spreads and exotic structured products. One reason for doing so are the many surprises investors faced in the 2008 crisis. Readers may e.g. remember […]<\/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":[5728,195,6170],"class_list":["post-31869","post","type-post","status-publish","format-standard","hentry","category-economics","tag-acting-man","tag-debt","tag-pater-tenebrarum"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31869","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=31869"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31869\/revisions"}],"predecessor-version":[{"id":31870,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31869\/revisions\/31870"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31869"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31869"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31869"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}