Leveraged Loans Blow Out. Distressed Corporate Debt Spikes

This is the moment when yield-chasing turns into a massacre.

By Wolf Richter for WOLF STREET:

Leveraged loans – they’re issued by junk-rated overleveraged companies with insufficient cash flows – are part of the gigantic pile of risky corporate debt that is now being brutally repriced as concerns over credit risk (the risk of default) are finally bubbling to the surface. Since February 22, the S&P/LSTA US Leveraged Loan 100 Index, which tracks the prices of the largest leveraged loans, has plunged 20%:

The index is another example of how in these crazy times, when the most splendid Everything Bubble collided with the coronavirus, ever more financial metrics are violating the WOLF STREET beer mug dictum that “Nothing Goes to Heck in a Straight Line.”

Leveraged loans are risky and murky. And they’re a big pile: about $1.2 trillion of US-originated leveraged loans, up 50% from $800 billion in 2015. These loans are traded in slices like securities or are packaged into highly rated Collateralized Loan Obligations (CLOs). But for years, investors had the hots for them, driven by their relentless chase for yield, in a world of interest rate repression.

These companies are often owned by private equity firms that had acquired them through leveraged buyouts, during the process of which they loaded up the companies with debt. In addition, PE firms extracted special dividends from their companies, funded by leveraged loans, which is a form of asset stripping. This leaves the company more leveraged and more precarious and more likely to topple. But who cares? Those were the good times and the chase for yield was on.

The Fed, the Bank of England, the ECB, the Bank of Japan, etc., they have all warned about leveraged loans. But they don’t regulate them because central banks are not securities regulators. And securities regulators, such as the SEC, consider them loans and not securities, and they don’t regulate them either. And no one knows into whose balance sheets leveraged loans can blow holes. But now they’re blowing holes into balance sheets.

Leveraged loans that trade below 80 cents on the dollar are considered “distressed” – and now 38% of the leveraged loans trade below that distressed level, up from 10% on March 13, and up from 2% a year ago, according to LCD by S&P Global:

During the peak of the 2008-2009 Financial Crisis, 81% of loans were priced below the 80 level. At the current rate of progress, the leveraged loan market will soon catch up with it. But as LCD notes, the magnitude is different:

Back then, there were only $583 billion of leveraged loans outstanding; with 81% of them trading at distressed levels, there were $472 billion in distressed loans.

Now, there are about $1.2 trillion in leveraged loans outstanding; with 38% of them trading at distressed levels, there are $446 billion in distressed loans – nearly the same as during Financial Crisis 1, but we’re just a few weeks into it.

And LCD reported that the average bid of the S&P/LSTA Leveraged Loan Index had plunged to just 78.36 cents on the dollar at Friday’s close.

These are the 10 most distressed sectors by the percentage of loans that trade below 80 cents on the dollar as of Friday at the close – and given the current mess, there are not a lot of surprises on this list:

  1. Air transport (98%)
  2. Oil and gas (81%)
  3. Brick & mortar retailers (75%)
  4. Aerospace and defense (69%)
  5. Leisure (68%)
  6. Hotels, motels, casinos (68%)
  7. Nonferrous metals and minerals (62%)
  8. Automotive (58%)
  9. Chemicals, plastics (44%)
  10. Beverage and tobacco (43%)

And over the five trading days ended March 18, these were the top losers by sector, in terms of price drops of their leveraged loans, according to LCD:

  1. Air transport: -15.4%
  2. Oil & Gas: -15.2%
  3. Lodging & casinos -14.5%
  4. Movies, Leisure goods, activities: -14.2%
  5. Nonferrous metals and minerals: -14.2%

Companies whose loans trade at distressed levels have a very difficult time borrowing new money to meet their cash flow needs, pay interest, and pay off maturing debts. But these companies have cash flows that are not adequate to service their debts – which is one of the reasons they’re junk-rated in the first place.

And when corporate debt blows up, it has an immediate impact on the real economy: At that point, these companies have to restructure their debts either in bankruptcy court or outside of it, which nearly always leads to layoffs, cost cuts, and slashed capital expenditures, which then ripple through the rest of the economy, thereby acerbating the downturn.

The Fed has pointed out this risk in its financial stability reports. But instead of tamping down on rampant yield chasing and on the corporate debt bubble by raising short-term rates to something like two percentage points above the rate of inflation by 2015 and unloading the pile of securities on its balance sheet to bring up long-term rates, the Fed further encouraged it all with its loosey-goosey monetary policies. So now here we go again.

Frazzled by the sudden appearance of Financial Crisis 2, the Fed scurries in every bailout direction. Read... Junk-Bond Spreads & BBB-Bond Spreads Blow Out Past Lehman-Bankruptcy Levels

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  252 comments for “Leveraged Loans Blow Out. Distressed Corporate Debt Spikes

  1. Chicken Little says:

    Well it fell more in 2008, so we’re not there yet.

    HYG – high yield corp bond fund, good representative, as high yield are often the most risky

    The sky is falling, but its fell back to earth, more in the past.

    The USA will continue to print fiat to infinite, and bail-outs will go astro; much of this money will float these loans, and the party continues

    What is the breaking point?

    Blood on the Streets, a real civil war, when the ATM’s run dry, when the virus non-tests becomes dog-eat-dog America

    So will continue the Ponzi, as long as it has a functioning country, in the coming months the urban USA city’s may prove to the world, that no where in the USA is stable, and thus the currency & gov lose their trust

    • Wolf Richter says:

      Chicken Little,

      We’re just three weeks into this. Financial Crisis 1 lasted a couple of years. So be patient.

      • Cas127 says:


        Excellent as usual.

        One pt – loans are almost always secured by specific Corp collateral, bonds are almost always unsecured.

        So, in a bankruptcy, loans have historically recouped maybe 60 cents on dollar (from collateral liquidation) and the bonds maybe 15 to 20 cents.

        Of course this is an unprecedentedly bad situation (more debt, worse economy), so both recoveries will be worse – but the hierarchy will remain.

        • joe saba says:

          wait til they reprice – treasuries of 1% to 10%
          wipe out in new MMT world
          no one and nothing safe

        • Wolf Richter says:


          Yes, loans have better collateral than unsecured bonds. But the collateral is not very good to begin with, and some of the collateral has been moved way and out of reach from creditors in maneuvers that PE firms have perfected a few years ago. Most of these are now cov-lite loans with few creditor protections. So recovery will be a lot lower than during the Financial Crisis.

        • Cas127 says:


          Agree to all…mostly wanted to point out that as bad as things are going to be for loans, they are going to be much, much worse for bonds (lacking even the pretense to collateral security). And the bond market is significantly larger than even the now engrossed loan mkt.

          In all probability the BBB fig leaf will have to fall away soon or late and a ton of credits will go from investment grade to junk (if not all the way to BK), meaning that most institutional investors won’t be able to own them – a forced sale triggering even bigger price drops.

      • AlbieOk says:

        Them: How does this end?
        Us: Badly.

      • Infinity is Real says:

        Kashkari say’s an infinite amount of money will be created out of thin air and used to purchase worthless bonds.

        What else needs to be said?

        Infinite fiat is available, will be deployed, until it can’t. Kick the can to infinity.

        • Killer Bee says:

          Why learn how to repair and install HVAC when one can sit back and enjoy the fruits of fiat-conjuring? Why drive that truck, teach that algebra class, frame that home, or mow that grass? Fiat conjuring will get you further, faster, and easier.

      • patrick helmick says:

        isn’t this the bilge the fed will be buying? it looks like the fed program announced this am will make the private equity-hedge funds- large investment banks very happy! keep the profits sell the losers to uncle sam at list price –

        • Memento mori says:

          Although the virus was a totally unforeseen exogenous event, the fragility in the system is entirely Fed’s doing. I can’t believe no one in the high places seem to point their finger at the Fed and say : look what you have done idiots.
          And worse now they are doing the same thing at an even bigger scale. That a complex civilization like ours can’t understand that printing money does not create wealth shows how far we have travelled in the road to our undoing.

        • sierra7 says:

          Patrick H.:
          “They” will be doing God’s work!
          What a disaster!!

        • sunny129 says:

          Can Fed re-establish Supply channels?

          Can it prevent further spread of virus, before it peaks?

          This a health crisis not financial crisis. May be some businesses need bailout loans. For most they want their JOB back! Can Fed can do that?

      • wkevinw says:

        The talk about “destroying the economy” seems a little drastic.

        I am hoping it’s more like a hurricane with just wind damage. (Flood damage is a lot worse.)

        Clean up some (economic) debris, turn the electricity back on and go!

        The restaurants, bars and service employees will be there when this ends. (the restaurants might have new owners)

        • Raging Texan says:

          The Fed/fractional banking system IS absolutely destroying the economy.

        • Michael Fiorillo says:

          From your keyboard to Dog’s ear…

          I don’t know about other parts of the country, but NYC was already over-saturated with restaurants and bars before this catastrophic exogenous event; the industry was due for a reset even before coronavirus. Once people accustom themselves to social distancing and the reasons behind it, it will be hard for the the status quo ante to just reflexively snap back in place.

          Additionally, many people, even among NYC’s huge lumpenbourgeousie, let alone the working class, are going to be too broke to go out to eat after this. With housing costs being what they are, they’ll be lucky to pay the rent.

          I pray that I’m wrong, but I suspect we’ll see families with young children begging outside of supermarkets before we see what you’re predicting.

        • Thomas Roberts says:


          Many stores were already on the brink of bankruptcy, many and I mean alot of stores are now doomed and will be OB forever. Restaurants could take a big hit, because, people will want to save money and eating out is the easiest expense to cut back on. Bars, can do well during recessions.

          This CCP Coronavirus will pop the almost everything bubble and plunge the world at least for a year or more into recession/depression. At all times though, the resources and ability to pull the economy back are there “once quarantine over at least”, but, that means accepting the new reality. Most peoples pensions, were, just numbers on a paper and will soon be gone, the 1percenters assets cannot be protected above everyone else and the politicians that enforce that, need to be gone. If those 2 things can be accepted, then, we can plan our way out very quickly. What will happen though is a big mystery.

      • The Colorado Kid says:

        Wolf, I think you’re going to have to change the logo on the mugs. It really can go to hell in a straight line.

        • buda atum says:

          Was thinking, better order mine before he does because everything does indeed seem to be going to heck in a very straight line, though, I think that’s the thinking of those who think we are there yet when we’re really just on the way there.

          As the Wolf said to the Little Chicken, “We’re just three weeks into this. So be patient.”

        • Simon Morahan says:

          I am old enough to remember the Andy Griffiths Show, with Opie Taylor, Aunt Bea, Barney Fyfe, Gomer Pyle etc, etc. Mayberry had all the businesses a small town needed. Not one national or Multinational business. Every business locally owned and operated, and except for Gomer, with the business owner and financier behind the counter. If we go back to that, and refuse to ever let a non locally owned firm operate within our jurisdiction, would that be a bad thing?

        • Stephen C. says:

          “. . . the financial metrics are violating the WOLF STREET beer mug dictum that “Nothing Goes to Heck in a Straight Line.”

          I think that one of your smart guys should go back and check the date when Wolf announced his beer mugs with his now famous dictum. Could that be very close to the date of the top of the market? If so, I think that would be an amusing coincidence. Or perhaps no coincidence at all.

      • Scot says:

        Just a few days into this, and it’s hard to look at my 2022 term bond ETF having dropped to 58% of it’s IPO value.

        So many people are bailing out in the hopes that cash will have more value to them, the price has just cratered.

        With the NAV at a huge discount and the Fed saying they are going to buy everything under the sun, am I crazy in thinking I can keep riding this out?

        • Wolf Richter says:


          NAV in a bond fund can be a wrong number. Many bonds don’t trade often. Some of them don’t trade for months. And no one really knows what they’re worth. When they do trade in a market like this, it’s suddenly 40% below their last trade a month ago. NAV is supposed to mark to market, but when there is no market, such as with illiquid bonds, I would trust NAV only as far as I can throw it.

          If you want to take a risk with bonds, I’d suggest buying some bonds outright. Then you also avoid the risk of a run on the fund. And you’re only exposed to company-specific credit risk.

      • sunny129 says:

        GFC lasted about 18 months from peak to trough from Oct 2007 thru March ’09

        With Fed’s SPIGOT WIDE OPEN this could drag on more than that I bet!

        as a tactical trader ( been in the mkt since ’82 but started as typical Mutual Fund + Blue chip stocks to now mostly ETFs including long & short leveraged ones. Also Bear MFunds and options!

        since i got shafted under the Crony Capitalism, all the loss of profit after 2009 is being recuperated slowly. BTW I lost zilch in GFC b/c inverse ETFs and PUTS! Also nibbling on the other end selectively!

        Unlike other 99% I am quite comfortable with BEAR!

    • mike says:

      There will also be more collapses among companies with good credit ratings but Enron style shenanigans. That is why the Republican Senators wanted their own measure: they want to grab all of the US resources now to bail out their owners/masters with trillions and trillions.

      Since Chinese communists took over so many industries with the help of our greedy rich, we may not be able to even manufacture the medicines that may help with coronavirus, rapidly and in the necessary quantities — even if they are found to be safe and effective. The system has to change.

      Some rational protectionism of key industries and a limit to corruption must arrive. We must say no to the greedy Republican senators’ masters and preserve the wealth of the nation to help the majority of Americans; they will need it by April or May– desperately.

      Some wealthy persons cannot be bailed out with over $200 trillion in current, pre-coronavirus, US liabilities– which most Americans ignore or do not know exist.

      • Jonas Grimm says:

        Stop using ‘communist’ and start using ‘authoritarian’. There IS a difference, despite everything you may have heard.

        • Cas127 says:

          List for us the communist gvts that have not started/turned authoritarian/totalitarian soon or late.

          History/politics is not made up of some abstracted, idealized goal, but the actual policies and practices employed.

    • Virginia says:

      Don’t worry Mnuchin wants $500 billion to bail out his buddies, no strings attached. Reminds me of Han Paulson’s request.

    • Cruiser says:

      To foment another financial mania central banks must push short rates to new nominal lows but they can’t, meaningfully, having hit the zero bound. We should be prepared for a secular scale financial decline now, likely lasting many years. The inflationary equity collapse during the 70s took 14 years to reach the ultimate bottom in inflation adjusted terms, ’68 to ’82 (inflation adjusted S&P 500). And we will witness financial carnage in fixed income during the inflationary secular decline now just ahead.

      Tangible assets offer refuge.

  2. Willy Winky says:

    Singapore Airlines has now reduced flights by 96%

    Emirates has stopped ‘nearly all passenger flights’

    I’ve been through a few recessions – I don’t recall something like this though.

    This is looking like the prelude to collapse

    • Wolf Richter says:

      Willy Winky,

      They’ll be flying again in a few months. But it is a temporary shutdown of the travel industry.

      • Broker Dan says:

        Maybe a good time to bargain Hunt?

        United down to $20 from $80 4 weeks ago?

        Once Covid passes (sooner rather than later) airlines will be back up. The locked down people’s will be quite anxious to get out of town after being bottled up. I think there are some nice buy ins right now.

        • Classy says:

          youre betting on a V demand rebound and your bargains could be worth 0 in another 4 weeks and even if theyre not, I’m not sure “locked down people’s” will have the time and/or the money to jump on tickets to orlando or disneyland or paris instead of trying to figure out how to get their kids back to school and get back lost work time/income in the next year?

          would you buy princess cruises now betting on a V demand curve rebound?

          leisure and business travel will not rebound to status quo ante anytime soon and I doubt airlines are a good bargain even at these levels.

        • MC01 says:

          While I hope your optimism is on track (judging by the drop in new cases and deaths here in Italy over the weekend there’s finally some glimmer of hope), be very very wary the air transport world will be in turmoil for years. This isn’t a crisis that can be solved by printing money and throwing it around like confetti like last time: it will require very careful handling. Have Western corporate, political and financial leaders handled Covid-19 carefully so far?

          Airline financials will be horrifying for many quarters to come and there will be many mergers and acquisitions. Remember the time when bad news didn’t matter is over and isn’t coming back for a while.
          And remember this time around governments and central banks won’t be able to make everybody a winner: there will be bankruptcies and blood on the streets. Assets like routes, slots at congested airports (think Heathrow and Schiphol) and aircraft will go on sale for pennies to the dollar. This will go on for quarter after quarter.
          All we can do is make these companies’ demise as painless as possible: bailing out everybody is simply not in the book this time. China has perfectly understood this but her leadership, as inhuman as it is, at least has its priorities straight.

          In short the bottom in the airline sector is still far away, albeit just like you I believe it will rapidly pick up again as restrictions will be progressively lifted. This will cause a ton of hopefuls to march straight into the jaws of the rolling wave of mergers and bankruptcies, but as usual big opportunities imply big risks: the time of making everybody a winner is over.

          To Wolf: I got your email. I’ll get to work on it as soon as I discover what the new genius ideas of our government are.

        • former says:

          But why buying distressed industry (airlines) that are currently losing money, instead of industry, that is right now printing money? Like crude oil tankers?

          Btw, because of markets sell off, they sold off too. You can buy a tankers that trades bellow NAV and some of them are on track to have yearly net income equal to their current market cap. FRO – Frontline as an example.

          Right now, because of oil glut, since economy slowed down, tankers are literally printing money, their rates are higher up to 10 fold. But they only need those rates to be double or triple on average, to make a killing.

          If you are already considering buying, why not looking at good positive cash flow? Some names to look at, they all have their positives and negatives such as biggest VLCC fleet, but bigger debt, or say lower debt but higher cost of operating, etc… there in no one best tanker, but some basket of them can make a huge difference at least 6 months down the road, maybe 2-3 even.

          Check out:

          I owe few from this list

        • Lance Manly says:

          Keep in mind shareholders normally take a haircut when a company files bankruptcy. They tend to be the last ones in line for the assets.

        • S says:

          Why buy airlines and cruise line stocks when you can instead buy other beaten down sectors?

      • Anthony says:

        Yes temporary but at what numbers are people going to be flying over the next eighteen months. I can’t see the huge Chinese holiday market opening up anytime soon nor the European.

        My real fear is that this virus acts not like flu which fades away but more like other diseases that never leave your body like malaria and herpes. For example, once you contract the virus that gives you cold sores then you have it until you die.(with attacks coming back every so often) Remember this virus is not flu…and really, anything could happen…we will see

        • Cas127 says:

          Good news – I don’t think C19 has a parasite that persists like malaria or a virus that can hide in the immune system immune nervous system like herpes (no evidence yet at least)

          Bad news – Viruses are so simple and hardy that they can almost be said to really not be living things in the sense we usually mean – they need our cells to reproduce at all.

          So C19 might become endemic, seasonally or not.

        • MC01 says:

          CAAC (Civil Aviation Authority of China) has been tasked by the government to prepare a massive restructuring of the local air transport industry: this order hasn’t been given now but last month, when China was reporting 50,000 new cases per day or something equally horrific. Call it callous, call it inhuman, but it means that like it or not the Chinese government, for all its defects, was already planning for the not-so-distant future.

          What are our governments doing right now? Running around with their hair on fire and acting like we’ll be in lockdown for the next century and a half. No small wonder that attitude is trickling down and some people, instead of keeping a realistic but positive attitude, are sinking lower and lower into pessimism if not downright despondency.

          Since handling the healthcare emergency is better left to healthcare specialists, there are a ton of decision makers sitting idly and at most passively answering to calls for help from the economy… why aren’t these folks hard at work for the not-so-distant-future like CAAC is right now? Or perhaps do they really believe all of us will simply lock the door, lie in bed and watch everything crumble around us?
          I am 43 and I have worked too hard and suffered too long to have what’s left of my life ruined by defeatists and sloths.
          At this rate I’ll just pay one of those coyotes to smuggle me to China or another Asian country where there’s still some kind of leadership, whether good or bad.

        • Wolf Richter says:

          Correct. The old normal is history. And when we go to some sort of normal, it will be a new normal, likely quite a bit different from the old normal.

        • Gandalf says:

          I do remember lots and lots of talk of the “New Normal”, circa 2009-2011, in the aftermath of the GFC.

          The most common prediction, almost a like a chorus singing in unison, was that the manic days of upward growth of the stock market were over, that a prolonged period of minimal growth and a flat to rocky stock market would happen.

          That’s not what happened, and really, the #1 reason I got on and have stayed on this website was that I realized that I no longer understood what had changed in the economics and finances of the world to so radically alter everything I had ever learned about it.

          My current prediction stands – the US, with its large pools of Libertarian, anti-Vaxxer, anti-Guvmint, Everything Is A Hoax groups of people, very low levels of social discipline, lack if Universal Healthcare, and a current government more interested in getting itself re-elected and continuing to spread disinformation than actually trying to stop the virus spread, will likely be one of the LAST of the major industrialized countries to emerge from this epidemic.

          There are hate groups out there right now in the US on the Internet currently encouraging everybody to spread the virus around to their favorite targets of hate should they get the virus!

          We have Ron Paul, a former Congressman from Texas, posting an article claiming that the COVID-19 epidemic was a fake, one week before his son Rand Paul, Senator from Kentucky, tested positive for the virus. BOTH are strong Anti-Vaxxers on top of all their other deficiencies

          Will idiots like them even get the vaccine, should one become available?

          This whole strategy of “flattening the curve” will 100% PROLONG the pandemic, in the absence of the rigid social controls necessary to successfully break the chains of transmission and thus actually STOP the epidemic completely.

          Something between a chronic endemic AIDS and recurrent seasonal flu is my best guess for how this pandemic will end up.

          AIDS NEVER WENT AWAY, and continues to kill 16,000 Americans every year. It eventually reached deep into the Heartland of America, even Bible Belt Indiana, forcing then Governor Mike Pence to finally allow a needle dispensing program after much initial reluctance and delay.

          The SARS-Cov-2 virus mutates rapidly. It could become more deadly, and kill more people, like the second wave of Spanish flu, and/or, it could mutate into a more benign form, and “disappear”, essentially vaccinating people accidentally worldwide with a milder version of itself.

          There will be consequences for the USD as a world reserve currency if the US is last to emerge from the pandemic. This will have major implications for inflation, the Federal debt, and the Fed’s ability to continue to set low low interest rates and do QE

        • Mike says:

          If we had only still had an epidemic office in the national security council, we might have prepared enough testing facilities (including private labs) in January, we would then be like Germany — whose competent government apparently quickly flattened the curve of the virus’s growth. Instead, we will be like Italy, but worse, with our private insurers’ gigantic foreseeable co-pays and deductibles frightening people away from seeking testing and treatment.

          To allow private insurers to keep $100 billion in profits from tricking Americans into keeping the worst healthcare system among developed nations, we will allow the deaths of tens of thousands of Americans.

      • Nicko2 says:

        Emirates shut down until the end of June,

        • Wolf Richter says:

          Air cargo is hot though. Airlines are piling deeper into it with their grounded passenger planes.

        • rvette454 says:

          Gandalf, I agree wholeheartedly. I distinctly remember the outbreak under Gov. Pence. It was in local areas across the State, mainly urban and low income. Pence didn’t want to lose the huge evangelical/ Christian vote that got him into office, and in Indiana it is a force. Many died and he relented after a lot of media exposure. Indiana is currently going thru the same with the NARCAN drug overdose which isn’t very expensive,but in their eyes represents a free for all for disabled addicted people. That doesn’t go over well with the homegrown crowd.

      • Javier says:

        I don’t think so, I believe this crisis is going to tip off a change in human mentality, the kind of change that alters behaviour, and that affects how we run entire companies, industries and countries…foreva!

        • DF says:

          Yeah, this has “Fourth Turning” written all over it.

        • Gandalf says:


          The Great Depression actually did do that.

          Glass Steagall was passed in 1933.

          Reading the political commentary of the 1950’s, there was universal antipathy from politicians of BOTH parties against financial speculation and greedy capitalists. Financial regulation was tight, taxes were high, stock market growth throttled at low to medium levels

          That way of thinking only lasted 50 years.

          In the 1980s all that changed with the Reagan Revolution. Guvmint regulation was now Evil, Greed was Good, and everything needed to be deregulated.

          Glass Steagall provisions were relaxed and then repealed completely in 1999

          Right. So here we are.

          Everybody go read your history before we start talking about “lasting changes”

        • Broker Dan says:

          I disagree. People have short attention spans and even shorter memories. Travel will be back up sooner rather than later.

          Furthermore; I am very optimistic now after following the effects of successful treatments for the past 2 weeks, both domestically and abroad.

          As someone that started following Covid stories since early January, and also one that had a very dark opinion of how bad this would become; I am really feeling better about US prospects.

      • Cas127 says:


        And, as bad as it is going to get in terms of cash flows, the underlying assets have not been physically destroyed.

        People tend to think of bankruptcies as utter ruin…and it is for current equity holders.

        But from a broader perspective, it is really just a change in ownership – usually from wiped out equity to creditors (who take a haircut, to equity’s beheading).

        But there is no physical ruin, society does not have to summon the physical resources to physically reconstruct assets.

        • Gerrard White says:

          It looks like the Chinese government did contain to a certain extent did contain the virus, at the cost of a two months general shut down of society and the economy, and obviously the bug escaped into the wider world

          Presumably with investment and more careful preparation (general hospital testing etc of the whole population twice a year, indefinitely, permanent and mandatory iphone ‘bug’ apps and tracking in real time) the outbreaks will be confined to a narrower spread and shorter in length, perhaps one month and only regional shut downs, curfews and martial laws

          This program to be adopted in every country – some may be able to afford and operate these large scale investments, many more will require massive inflows of capital and expertise and infrastructure

          Or perhaps the world wide consensus, to be formed by a new International Organisation perhaps, will decide that this program although laudable, must take second place to the combat climate change program, or indeed another

          Or perhaps there are those who claim that what appears already to be a recurring virus, or family of, can be prevented from occurring in the future, so obviate the need for future combat infrastructure

          Or perhaps it may be possible to live with this virus and it’s future derivatives without having every time to fight them to the death ?

          How can this be imagined possible ? Or why should it be more difficult to imagine this than any of the scenarios sketched above ?

          If it is impossible for humans to get cleverer about their health, why assume or plan or hope that viruses will stay as relatively benign as this current one ? What does planning for the worst involve ?

        • Mark says:

          “the underlying assets have not been physically destroyed.”

          You mean like an 1,100 sq foot junk house in SF valued at 2.5
          million dollars ? You mean that type of “asset” ?

        • Cas127 says:


          I am not arguing in favor of moronic overvaluation…if you go back thru my posts here you will see that I was frequently pointing out the moronic valuations induced by ZIRP (really for about 20 yrs, as DC’s way of covering up US’ increasing loss of productive competitiveness to China).

          What I am highlighting is more in the vein of survival economics…whoever insanely overpaid for that house is going to suffer mightily (and he is going to drag the innocent US taxpayer/dollar holder into his deserved suffering as well…again).

          *But* that house continues to exist as a physical entity…it can house someone/anyone…at some greatly, greatly reduced price.

          Now imagine if it were destroyed in an earthquake (along with its insurance company) that house would cease to exist…it would truly have zero utility value to anyone…and significant material and labor resources would need to be summoned to replace it.

          That would be much worse for society than the transfer of ownership that happens in a foreclosure or bankruptcy.

        • economicminor says:

          What I worry about is the FED and the government bailing out the top echelon with copious amounts of cash and they do what they did last time and buy up everything with it..

          If you remember, the main reason houses never got really cheap last time was that the insiders got lots of cheap money and special deals to buy up tens of thousands of foreclosed homes.. You know, to put a floor under the market..

          In the end, they raised the rents and the house prices until most people became very high income economic slaves.

          To me these new proposed bail out proposals will just continue this practice until we have virtual serfdom in the US and probably, Canada, Mexico and Europe too. And Free Market Capitalism will be a thing of the past totally..

        • The World is Too Much Without Us says:


          “That would be much worse for society than the transfer of ownership that happens in a foreclosure or bankruptcy”

          I completely disagree with your narrow materialist property based view-point on life which somehow values and shows a near complete lack of imagination in spouting some rehashed elite political ideology of ‘progress as value’.

          you say that demolished house has “zero value to anyone” wow! you assume so much! what kind of society would benefit? the kind we have now?

          and mostly from a WASP point of view? which sees the world as something to ‘civilize’ by building things because building things like Juicero™ or Theranos’ Edison™ = value to society simply because – by your logic – they seem to have a handle on entropy.

          You sound like a 1950s engineer or a 2020 denizen of palo alto.


        • Cas127 says:


          Don’t disagree at all – ZIRP has been the engine of RE asset inflation, which is almost the exact same thing as saying rent/mortgage inflation (basic DCF math, the higher rent cashflows needed to service the higher RE asset costs/prices)

          The whole rotten ZIRP/money printing exercise, no matter which evil iteration, essentially serves to transfer wealth from those who have prudently saved and not been suckered by asinine valuations to those who have engaged in reckless, leveraged speculation.

          But DC needs that reckless, leveraged speculation to preserve the illusion of normalcy (ie, obscure the industrial/economic ascendancy of China over US since 2004 or thereabouts) – without the idiotic, ZIRP-founded asset price growth – US GDP figures would have been much worse over the last 15 years.

          DC would have been interrogated and tossed out on its collective corrupt ass when found habitually wanting in response to the industrial challenge.

          But Fed ZIRP papered over all that.

        • Cas127 says:

          “The World is Too Much Without Us”,

          You are free to live in a hole in the ground. No one will stop you.

      • Lance Manly says:

        One thing to keep in mind is that if the world is successful at “bending the curve”, it will not develop the herd immunity to keep the disease at bay. To be truly back to normal we will need either an effective therapeutic, prophylaxis or vaccine. Keep in mind that development of an effective vaccine will be at least a year. Why? The efficacy of vaccines vary widely, in some trials they actually make the disease worse so you need to be very careful to have stringent clinical trials.

        • Cas127 says:

          Agreed, although translational drug researchers have already id’d dozens of *existing* drugs (that have already gone through FDA adverse effect testing) that may work as drug treatment for C19, lessening severity, virality.

          (Wolf let me know if there is a rule about reposting same link – this is my third time…but I think it is an important article)

        • Wolf Richter says:


          Yes, an occasional link to support a fact outlined in your comment is fine. But posting the same link multiple times will send the link into the link shredder (though the rest of the comment dodges the shredder).

        • wkevinw says:

          Lance Manly-Immunity will be developed, just more slowly.

          My microbiologist/MD neighbor believes that the virus can be controlled by the current actions. It stops finding places to survive after hygiene and social distancing.

          Right on vaccine work. It’s threading a needle that requires months of testing at minimum.

      • TheRealMRDyno says:

        “Herd immunity” for this takes about 50% immune population, or about 160M in the USA. That is about 438,000 new cases per day for a year, in the USA. It seems like this might go on for a while.

        • Wolf Richter says:


          No one is going to wait until the virus has disappeared. This would be nuts. And people who think that are nuts. The idea is to slow the transmissions rates so that the ICUs are now overwhelmed and then ease back into economic activity with lots of safeguards still in place (social distancing, hand-washing, etc.).

        • Shiloh1 says:

          Isn’t the spread an exponential, not linear function?

          1 to 3 to 9 to 27 …

      • Zrussell says:

        They’re busy making smaller seats…

    • Blockhead says:

      Wolf, you need to offer a choice to your reader, s second beer Mug which says: Some things go to heck in a straight line.

      • Wisdom Seeker says:

        I’d be patient before predicting that everything goes to heck in a straight line. We could easily have a +20-30% snapback rally at any time. Of course, it could come from a level 30% lower than present!

        Too early to tell.

        Another option would be “Nothing Goes to Heck in a Straight Line – except the Everything Bubble” ?

    • roddy6667 says:

      My wife and I had a vacation to Singapore planned on Feb. 14. We had airline tickets and hotel reservations. I was worried that Singapore would close its doors to anybody entering from China, so we flew to Seoul and back on Feb. 1 to keep our visa valid. While we were on the way back from South Korea, Singapore blocked all entry from China. Now China is approaching clear, and other countries are just getting into the heavy part of the sickness.

      • Asia Sitrep says:

        Things have gotten real bad finally here is SE Asia.

        China lobbied hard to everyone to ‘stay in business’ to keep accepting passengers from Chinese airplanes.

        Now almost all the infections come from the outside, from Japan, Korea, & China. They’re people returning home. 100’s of 1,000’s of illegals that have spent their entire lives working in HK/Korea/Japan all want to come home to SE-Asia. Thailand alone has had some 10k return in the past month from infected country’s, all must self-quarantine. The problem has mainly been the tourists ( Korean/Japan) who come to party, and get locals infected and then return the locals don’t realized their infected until their elderly parents get sick first.

        Now all borders in every country ‘land borders’ are closed the problem is there are 1,000’s in Queue to return to Indonesia from Singapore, from Thailand to Laos&Myanmar; Even in Indo the locals don’t want these people to return, much opposition at the ports on the Indo side of the ferry.

        Singapore just two days announced that no foreigner can go to a Singapore hospital, this is to keep out the rich Asian who is infected and fly’s to Singapore for treatment, but also because the Singapore hospitals are already over-whelmed and want to give priority to citizens.

        Almost all country’s in SE-Asia are no longer accepting foreign money ( say foreign money is dirty ), this makes it very difficult for a tourist, as many just brought cash, which now is unwanted by everyone, as it cannot be sold to the banks, which quit accepting foreign money weeks ago.

        Most of the country’s in SE-Asia just hit the magic number of 100 infections in the past week, once this number is hit then cases go to 1,000’s quickly as had been shown everywhere on earth.

        Right now self-quarantine is self-policing, where I’m at 1/2 the policeman are now under quarantine, because when they go to an infected home, they lack protection. This means that very soon the entire quarantine enforcement will be turned over to the military.

        Everybody knows what’s coming and there is a panic to return home.

        If your a frequent flyer, best to hunker down quickly and become invisible. The time to dig in was months ago.

        There are said to be 500K Europeans tourists trapped in Thailand, their visas are expired, and there are no return flights, their money is worthless because Euro’s ( or any foreign currency ) are no longer accepted anywhere.

        The real problem now is the locals, so far all the SE-asian nations have been soft on their own people and hard on foreigners, but its the locals that have the higher infection rate, because they have not isolated and have continued to ‘party’ in large groups in karaoke bars. All the sex-pat tourist operations were shutdown months ago, but the local ‘entertainment’ kept operating.

        I think things will be fine, all the test-kits are in place; Right now everyone is getting illegals out of their country’s, as not to over-load the medical systems. I think the reason for not accepting foreign money is to keep the foreigners off the street, and make them leave.

        The hammer is coming down hard now in the coming weeks for a month, there is plenty of light at the end of the tunnel. Things will be fine.

        • Stephen C. says:

          Until yesterday I was living in Malaysia, but only on a 90-day tourist visa. (I am a US citizen.) I would have preferred to hunker down there during this pandemic because of their superior health care system (measured per my ability to pay) and because . . . no other way to put it, the local sense of public behavior/decency which translates, for me, to safely. No panicky behavior, meaning no stabbings at the local equivalent of Walmart over toilet paper or bottled water.

          However, my visa was going to expire soon. The original plan was to do a short hop to Cambodia, self-isolate in a hotel while working online, and return to Malaysia for another 90-day visa.

          But as I watched the news, each country in the region began to put up walls to American citizens. I finally had to face facts and come home to the USA. I consider myself lucky to have made it because the flight board at the international airport in Kuala Lumpur was 95% flashing red with cancellations, and the “every nation for itself” mode seemed to be kicking in. (I hope this is a temporary reaction.)

          The reason I post this personal information is . . .

          1. In response to Asia Sitrep, I am deeply curious as to the hardships facing expats in Thailand, Cambodia, and other parts of Southeast Asia who really don’t have the option to hop on a plane and come home. Especially curious as to if it’s true that the locals don’t want to touch foreign currency. Cambodians deal for the most part in dollars and I’d love to know how they could do otherwise. I have to say that physically currency, and the issue of touching it, is, to my understanding, not high on the list of concerns in Southeast Asia. However, I’d be willing to stand corrected with citation.

          2. In response to those above who are looking for a quick rebound in international travel/stocks in the airline sector: Personally, I would hop on a Singapore Airlines flight back to Southeast Asia as soon as this pandemic blows over. But that’s not to say that I know anything about high finance or if various airlines will survive. I get the sense that Singapore Airlines will survive. However, the question as to whether or not *I* will survive, economically, is in great doubt. And I think that is the issue at hand. Pent up desire among the public is one thing. Ability to act upon said desires is another.

          But if I do survive, and many other millions of wanna-be expats like me, business travelers, and yes, even profligate tourists, manage to survive, I just don’t see how airlines will be a thing of the past. And I don’t see how we can be expected to, month after month, sit around under what is a piecemeal, country by country enforced, global martial law.

          I believe the governments of the nations of the world are soon going to have to capitulate and let international travel (and all commerce) bounce back, regardless of the damage that does to their local populations and, to put it gently, their demographics (elderly people.)

          There is just too much at stake for their younger people. And what I saw in my time, traveling in Southeast Asia, was an incredibly inspiring plethora of young people willing and able to work and make a life for themselves, and yeah, babies. It was happy-making to just walk among these bright-eyed kids.

          3. The article was about exotic corporate loans. Exotic, meaning that few Americans have any idea what the f. . . is going on, including me. Having said that, the fact that the Fed and the U.S. Congress seems willing to bail out every single one of these frickin’ geniuses/parasites who have devised such financial instruments, leads me to believe that they themselves are in essence old, death-bound, and at war with young people and us few elders who saved, who could, by means of reasonable investment and interest rates, support said youngsters to go out and make a life.

          Jeez! After writing the above I realize how pissed off I am. One in-law sent by email to petition US Senators. I’m not going to sign a fricken’ petition. I want their heads on a pike!

          Sorry for the late night rant but giving up a nice condo apartment in Malaysia for 1/5 of what it could cost me in the USA, and the prospect of never being able to return due to said “high finance” has a certain affect, or effect, or whatever.

        • Wolf Richter says:

          You’re not the only one who is furious.

      • rhodium says:

        China is probably lying, but even if they aren’t, they can’t ease up any of the restrictions without the virus spreading all over again. That’s going to be the quandary these governments face; a rolling choice between smiting their own economies and letting the virus go back on an exponential growth trend. The data proves quarantines work, but what it also suggests is that relatively low numbers of infected overwhelm healthcare systems across the globe. For almost the rest of the year this will be a choice of economy or lives…

        • Cas127 says:


          In an absolute worst case scenario, segmented (regional) and rolling quarantines may make the most sense medium and long term.

          Different regions are so far affected quite differently. The worst hit should probably do maximum shut down to limit spread/hospital overload.

          But the least hit may need to stay more open, in order to produce the goods the 100% locked down (and everybody else) need to live.

          A nationwide 100% lockdown would probably see serious hunger/starvation (and therefore rioting) start after 2 or 3 weeks.

        • Dave says:

          The ‘lying Chinese’ are rushing medical supplies and personnel to 81 affected countries to prevent their healthcare systems from becoming overwhelmed. The US, EU…?

        • Shawn says:

          It looks like the Chinese have stopped reporting cases so as usual, we will never know what is actually happening there with respect to COVD19.

        • Gandalf says:

          The Tom Tom traffic site shows that Wuhan is STILL nearly totally shut down, which is strange if there are NO new cases of community acquired COVID-19 there

          Wuhan had been a major industrial center for all kinds of stuff from pharmaceuticals to car parts, which are still no being made

        • Bet says:

          My brother’sin laws live in a city outside Wuhan. Two day’s ago I was told Wuhan is still in lock down. Cities around Wuhan returning to work. Elderly facilities still under strict lockdown

  3. MCH says:


    You know what this reminds me off in an off handed way. Do you remember when Eyjafjallajokull erupted and halted air travel across the Atlantic for about a week and a half? I was stuck in Europe, hitting the airport everyday to see when they’d resume flight. That was unprecedented too, although in terms of scale, nothing compares.

    You touched on the bad corporate loans, what will happen I wonder to all the tiny auto loans that are out there. I figure that’s a write up waiting to happen as well.

    You are going to be busy.

    • Gandalf says:

      I was in Stockholm, Sweden when Eyjafjallajökull erupted, for the 2010 ISMRM meeting.

      I checked the news reports every day for progress on the volcano dust over Europe. The NYT had a frequently updated map of affected airports that was very helpful.

      The air cleared just in time for me to take my scheduled flight back home.

      One thing I remember was that I had booked a red-eye overnight flight back, and had been counting on taking the handy high speed train to the airport. But then I discovered that all the trains in stockholm, including the high speed train, shut down at night.

      So I ended up checking out early and taking the trains to the airport late in the evening and then laying down and napping at the airport overnight with my bags.

  4. KPL says:

    “the Fed further encouraged it all with its loosey-goosey monetary policies.”

    If that was loosey-goosey, what should we call the policies being unrolled now. Do these guys even understand what they are doing? When they could not unwind the policies of 2008, how are they even going to unwind this? Do they ever stop to think of how fragile the system is (created by them)?

    This is what you get when you want to create an illusion of no-risk with a ‘I AM GOD’ attitude and say I am here to pick up the tab, just carry on your merry way. You need not go far to understand, a dose of common sense would do. Assume a toddler is learning to walk. If the mother starts propping up the toddler every time he falls, when will the toddler learn to get up and walk on its own? The toddler will look around for the mother to prop it up as soon as it falls.

    This time you might well be proven wrong on a permanent basis before the blood-letting stops – it might all go to heck in a straight line. I also think that might be the only way we get a much-needed total reset of the financial system with its easy money and illusion of no-risk. As a bonus, it will also stop the talking heads and all MF managers telling us it will all come back, stocks are at mouth watering levels, stocks are cheap now that they are down 30% blah blah blah.

    If you are not willing to learn lessons from your mistakes then it has to be taught to you in a manner where you cannot but learn.

    • Pelican says:

      Pardon my ignorance – Couldn’t they try and prop up the markets yet again by doing “whatever it takes”, as in expand the balance sheet by as many trillions as it takes and buy a whole bunch of assets, forcing everyone to play the markets like they’ve been doing for a decade now?

      • KPL says:

        You can bet they are going to try (in fact they are on the job). Even if it works for the moment there are bigger questions down the road (unlikely a decade this time) and is likely to make the system more fragile and more prone for failure. As of now all their efforts does not seem to be working which is why they are doing more and more. Even for the Atlas that the Fed is, propping up everything across the world is going to be a tad difficult.

        IMO, the risks (created by their constant intervention and not allowing the market to find its feet) have made the system so fragile that it might all come tumbling down this time and our Humpty Dumpty might not be able to make it whole again. It has taken 40 years (Greenspan – 1987, LTCM onwards).

        • Gordian knot says:

          I agree. this is the first time all money is a negative unit of account. So there genius idea is to fix debt with debt. the U.S. treasury is suppose to exist for the benefit of the republic (American people) and do set offs to extinguish debt.

      • Frederick says:

        Doubt it Investors are “ shellshocked” If they were smart they would be buying precious metals

        • HowNow says:

          This looks more like deflation than inflation, in spite of FED stimulus. Precious metals are a safe-haven for inflationary fear. Currency collapse?? It’s so remote, in reality, that it’s probability would be stupid to bet the ranch on. Could it happen? Yes, and Wolf’s “meteor” could happen to us, too. But, imo, improbable, in spite of dystopian thinking and images of armaggeddon.

        • HowNow says:

          And, thanks again, Wolf, for your excellent article. You could teach the writers at “Barrons” a thing or two about relevant reporting.

        • Frederick says:

          How Now Gold does great during deflation as well as inflation It will act just as it did during the last financial collapse Drop for awhile and than take off when people realize how much currency debasement is coming down the pike Look for gold over 2000 by year end

        • Gordian knot says:

          You can never let the slaves figure out they are slaves. No soup for you.

      • historicus says:

        Central bankers will accrue more power, rates will be zip, and the stock market, once again, will be the only place to put your money.
        If only the Fed was held to its THREE mandates…
        max employment
        stable prices (no inflation)
        and MODERATE long term interest rates, ie not extreme, as in extreme record lows. There must be a fair return between borrower and lender and the Fed interferes with this with their manipulations.

        • Petunia says:

          The fed’s mandate was and should still be only to be the lender of last resort to the member banks. The fed was not created to regulate the economy and should not be setting market rates or employment levels. Their original mandate was to add liquidity to the banking system during bank panics, that’s it. The only rate it should be setting is the the fed funds rate between the banks. If the markets want to use the fed funds rate as an indicator, that’s fine, but the market rates should be set by market participants.

  5. Ensign_Nemo says:

    It’s obvious that most stocks and all high yield bonds (i.e., “junk”) are tremendously risky for the foreseeable future.

    Here’s a question for the bright minds on this board: what is a safe and boring investment that would at least match the inflation rate with minimal levels of risk, under the current market conditions?

    Let’s say that the government sends us all $2000 and we have no foreseeable need to spend it for the rest of the year. What do we do with it?

    Checking, savings, CDs, and money market accounts are paying either zero or a hair above zero interest rates, as far as I know. I’m not sure that I would want to keep much money in a bank right now, as there seems to be a slight but real chance of a bank “holiday” if coronavirus continues to go exponential. Potential bank failures and “bail-ins” also make the risk of “money in the bank” exceed the slender-to-nonexistent rewards of keeping excess funds at a bank. Even if the FDIC pays everything back eventually, you might have your money tied up in red tape for a while.

    Treasury bills are trading at slightly negative rates right now, so they won’t match inflation (unless we somehow go into deflation). With the recent weird oscillations in prices, standard Treasury bonds also seem to be a questionable choice, and the rates for those are slim. Looking at Bloomberg right now, in trading before the open on Monday March 23, the rates for up to a year are all negative (-0.05, -0.02, and -0.03% for 3, 6, and 12 months) and the 10 and 30 year bonds are trading at 0.82 and 1.43%.

    There’s not much upside here – unless the Fed decides to put the US bond market into permanent cold storage, like the Bank of Japan did to their bond market.

    Are TIPS and I-series bonds the best options right now, and which is better?

    I also wonder if money itself – i.e., the US dollar – is going to start to die from hyperinflation / overprinting. In that case, buying any sort of stuff might be better than holding a rapidly depreciating Federal Reserve Note with a picture of a dead politician on it.

    • VintageVNvet says:

      If, in fact, we really do get that $2K, or in any other case, the only things I have ever heard of that keep up with the ‘real’ inflation are ocean or gulf front property, fine old art, (including fine old ”native” arts,) and fine old jewelry (including fine old jade.)
      Forget any other claims due to the fact that more and more of whatever else can be made.
      If budget can’t get there,,, go driving around true ”back country” and small towns throughout USA. We have found really amazing RE bargains there for the last 50 years or so, but be sure to have an ”end game” clearly in mind, as these kinds of opportunities are usually the very opposite of ‘liquid’ assets, and will not be as close to keeping up with inflation generally.
      Meanwhile, if you can, find a local school to learn ”hands on” building construction and maintenance skills; it’s very easy to find a lot of very good theory and practical information on the net, but that is not all you need to start. You can also get a lot of hands on instruction and practice on any Habitat for Humanity job site, and they are used to dealing with newbies.

      • Cas127 says:


        Excellent…Wolf should let you do a guest post on alt-assets. The insights into future supply capability and exit planning are key…and apply to all asset classes.

        One pt…for art objects…wariness is warranted because, at bottom, in a really bad environment…their true utility is dubious and subject to fashion on the demand side even in semi-normal times.

        On the plus side, I sorta suspect that high value art (ditto PM) is used by HNW people around the world to partially circumvent the fiat/FX regimes of the gvts while nevertheless taking advantage of interest rate differentials.

        So there might be a sort of secret demand for art internationally (although in distressed times, that demand is likely brittle too).

    • IdahoPotato says:

      Set up a backyard food garden. It is a great investment.

      Donating to the local food pantry is also a great investment in the community.

  6. kk says:

    One major religion used to teach children the four last things – death, judgement, heaven and hell. Once you die, judgement is instant, and hell is a straight line.

    • Anthony says:

      It still does

      • Cas127 says:

        Everyone should go read Kipling’s “Gods of the Copybook Headings.

        Then, after a pause, “If”.

        • Paulo says:

          Great read. Brilliant.

          Own opinion, I don’t believe air travel (as an example of recent BBB consumerism nonsense) has a hope of returning to the levels of recent excess. For most folks cash will be gone, if they ever had any left over from chasing their consumption drives. More excess on credit? After the frenzy about to occur to keep this wheel upright? Not likely.

          “And that after this is accomplished, and the brave new world begins
          When all men are paid for existing and no man must pay for his sins,
          As surely as Water will wet us, as surely as Fire will burn,
          The Gods of the Copybook Headings with terror and slaughter return!

          From Axios this morning:

          ” 53 million Americans — 44% of U.S. workers — are making a median of $10.22 an hour, or about $24,000 a year.
          About half of low-wage workers are sole earners for their families, per Brookings Institution fellow Martha Ross.
          “As you see the economy shut down, it’s a picture of a workforce that was already vulnerable that’s now going to be in much deeper trouble,” Ross said.

          All this in a supposed rich country!!!!

          Here is an example of where things are at. My sister lives across the lane from a retired doctor. Said doc scrounged up the double sided material for surgical masks. They sewed masks all day yesterday and the doc will take them up to the local clinic, today, and get more sewing supplies.

          “This is America”, sister said. “And we’re sewing masks up at home because we don’t have enough of them”? (And people think air travel and tourism is going to mount a comeback)?

        • A/C in SD says:


          One of my fav’s! I have often posted this line here:
          “And though they had plenty of money, there was nothing their money could buy”.
          Inflation? I think one can still find TP around but you may get wiped out by the price!

    • HowNow says:

      What if “judgement” is biased? Is there a court of appeals?

      • Stephen C. says:

        Judgment is always biased. We can’t know everything, otherwise we would be God. And so we are left with evaluation. As a consequence we read Wolfstreet.com. :)

        The Buddhists speak of being born again into the “ocean of existence” (suffering.)

        We get out of that constant re-birthing by making the right investments, become truly wealth, and bequeathing that good karma from our merits to our heirs. That is, if property right hold up. :)

  7. former says:

    >> but some basket of them can make a huge difference at least 6 months down the road, maybe 2-3 even. <<

    Typo, should be:
    … maybe even 2-3 years

  8. Bill from Australia says:

    So airlines are going to sell planes for pennies in the dollar, mommy can I have a Jumbo pretty please. might be cheaper than a house just a thought.

  9. Crazy Chester says:

    Heck? Hell, we’ll just be changing flights in Heck.

  10. Kent says:

    So what exactly is the scenario that everything goes back to normal? “Bending the curve” doesn’t end SARS-COV2, it just allows the hospitals to keep up and minimizes the death rate. COV2 is a virus, not a bacteria. We can’t exterminate it with antibiotics like small pox.

    Is it going to rear its ugly head seasonally every year from now on and we all go into lockdown? Is it going to mutate every year like the flu so we will get a best guess at a COV2 shot? At some point do we just let it roll through the population like the Spanish Flu, let it kill everyone it is going to kill, and burn itself out? Hoping of course that I’m not in the “killed” column…

    • Wolf Richter says:


      We will not be able to return to the old normal. There will be a new normal, and it will be different.

      • Broker Dan says:

        Respectfully I disagree.

        Not in front of my CPU, do I can’t send the links, but, treatment exists now.

        Google hydroxycholoroquine and Zpack. That’s the cocktail that’s working.

        It’s now official govt guidance to doctors in 5-7 countries.

        Trial in France

        Studies in China and Australia

        Anecdotal all over the US

        It’s combating the virus.
        It’s cheap
        It’s been around for 70 yrs

        Check it out! I’m super excited

        • Broker Dan says:

          Forgot to mention, Trump sent a bunch to NY, they are starting trial immediately.


          65 doctors, medical professionals and scientists joined New Jersey State Senator Joe Pennacchio in calling for local governments and the federal government to implement the use of Hydroxychloroquine to fight the coronavirus, COVID-19. Pennachio wrote over the weekend, “Federal and State agencies should prepare themselves for real time evaluation of HCQ and have in place a protocol for its manufacturing and distribution.”

  11. historicus says:

    Central Bankers denied free market business cycles….cycles that periodically flush excesses, improving the health of the market.
    When not allowed to occur, excesses build up, game playing goes undetected.
    But central bankers know better, just ask Yellen or Bernanke.
    So when the excesses are flushed, we get the ten year systemic threatening “flush”. And here we are.

    • Paulo says:

      And just this moment the Fed announced open ended QE!!! The Futures being down close to 5% launched up 1,000.

      This is not going to be pretty.

      The Crash always displays insane volatility and it is getting worse by the minute.

      • KPL says:

        May be it works, may be it does not. For the moment it is working, Futures in +ve territory. For how long?

        What next if it does not work? Helicopter money!

        Interesting times indeed!

      • NuwGuy says:

        And right after Boeing shuts down. Yep, all is well. Haha.

  12. MF says:

    The “share of leveraged loans” chart shows the difference in magnitude of the emergency between last September when something broke in financial markets and this month. It also shows the breathtaking speed of the tidal wave washing over debt markets.

    The Fed’s (massive) intervention managed to calm things down by January.

    And now this. I don’t know what multiplier the chart implies, but whatever it is, that’s how much the Fed would have to multiply what it has done since last fall. So we know that whatever actions are coming, they’ll be epic and historic … and insufficient.

    We’re Japan now. Like them, we’re too old demographically for a popular revolt. So if you’re thinking that, get it out of your head. Retirees just want to try to hang on to some portion of whatever they had. They also prefer to enforce social order at the expense of liberty. So get used to that too. They will demand “their” companies (whichever ones provide their pensions or make up the investments in their IRA’s) get bailed out. And they vote, so politicians will listen.

    Boards of the buyback queens and junk debt issuers will celebrate lower labor costs. Like all recessions, early retirement schemes will abound. Expensive staff will be replaced by cheaper younger staff. This will only last so long though. Millennials aren’t nearly as loyal to employers as their parents were.

  13. timbers says:

    Everyone can calm down now. The internets say Fed has infinite amount of cash. All they have to do is add more zero’s in the Fed’s computers.

    We can all relax now. The Professionals are taking over now.

    • Gordian knot says:

      The teller at the bank always ask me if there is anything else she can do for me and i say yes , will you please add a zero to my balance. your basically giving me nothing. you wont get in trouble. She nervously laughs and politely declines.

  14. Stephen says:

    I live in FL, so our tourism based economy (remember we have no state income tax, so we rely on revenue from tourism to support the infrastructure) is starting to suffer. It seems almost ridiculous that the state and local governments have decided to shudder their businesses to stop the spread of a virus that will really effect the elderly and immuno-compromised, who are at risk of ANYTHING that lurks about. This seems a little like the heady weeks after 911 when if you questioned the ‘official narrative’ of events and the government’s responses (like invading Afghanistan) you were called a fool. Well, count me a fool. Shutting down local and national economies instead of just sheltering the high risk component of society is plain stupid. The shock waves of self-shuttering of the economy is going to go on for months and years. I am sorry, we were teetering on the edge to begin with and now we are in no where land! Doctors should treat viral infections not be relied on to shut down entire economies which they do not understand. In future years, like 911, people will start to ponder the official narrative and responses, and they will start to see something very sinister in the entire thing. Not going to be pretty guys and gals. It did not have to be this way, although some economic pain was inevitable because of the everything bubble popping at some point (but not the shuttering of local businesses).

    • KPL says:

      “Shutting down local and national economies instead of just sheltering the high risk component of society is plain stupid.”

      Some get it. But then the people running the show need to.

      • Cas127 says:

        Agreed, long enough, deep enough lockdowns will cause supply chains to sputter after a few weeks, causing instances of true hunger and wildfire inflation (lessened goods supply meets inflated money supply).

        At that point, the powers that be will “flip the switch” and discover the virtues of “fortress-ing the vulnerable” and loosening the lock-down on everybody else.

    • Paulo says:


      “In the United States, among almost 2,500 patients with COVID-19 with a known age, 29 percent were 20 to 44 years old, according to the Centers for Disease Control and Prevention (CDC)Trusted Source. ”

      “Jérôme Salomon, France’s director general for health, announced that more than 50 percent of the country’s COVID-19 patients in intensive care are under the age of 60, according to CNN ”

      How old are you?

      I get you are worried for the economy. Who isn’t. However, when you publicly throw an entire demographic range into the mass grave for economic advantage, be careful you don’t slip. Personally, I would not want to be your neighbour. Ever. Remember, you reap what you sow.

      • IdahoPotato says:

        These are the death panels Sarah Palin referred to – the ones which decided who lived and died. They are here and some folks who feel invincible are just peachy with it.

    • Nicko2 says:

      It sounds like you’re suffering the mounting consequences of poor political leadership. My sympathies. Sadly, the entire global economy is about to grind to a halt. The only thing one can do now is mitigate the pain on an individual level.

    • Prairies says:

      Sounds weird to me but instead of just having a state tax for stable revenue, you would rather have tourists spread diseases and kill the children of the next generation and kill the elderly.

      Maybe just use common sense and use taxation to fund state operations instead of tourists. It’s what taxes are for, if your officials abuse said system to remove them. Novel concept I know.

      • p coyle says:

        i suspect FL politicians will “discover” the many benefits of taxation in short order.

  15. Disgusted In Mount Pleasant says:

    Bailouts if we must, at least in some cases, but the bailout is converted into shares valued at whatever the price is at the time and those are distributed prorata to all taxpayers based on their most recent filings with an AGI cap of some sort – maybe $100k or $150k.

    Important to be careful as to who gets the bailout, if I recall correctly someone asked Sam Walton after Black Monday in 1987 how he felt about suddenly ‘losing’ a vast amount of money, to which he replied he didn’t much care, still had the warehouses, stores, trucks and people, hadn’t really lost anything…….

    • Petunia says:

      The only bailout that’s going to work is trickle up financing. Give the money back to the people and let them vote with their dollars. Giving companies money, even taking back equity, doesn’t work because the regulations are skewed to enrich the management.

      • Unamused says:

        The only bailout that’s going to work is trickle up financing.

        Exactly right, but it won’t happen. You should have turned left when it still could have done you some good. There’s nothing for you now but to sit back and listen to your favorite ruthless corporatists catapult the propaganda. In a few months you’ll be wishing you could still vote.

        I’m glad we’ve finally come to an understanding.

        • Petunia says:

          Like I said before, “I’m going along with the narrative for now.” Nobody knows how much rot there is in the system better than me. Left or Right hasn’t mattered for a long long time, they are all in on the scams.

        • Gordian knot says:

          THE democrats AKA ( smothering mommy) have social program scams, total corruption and the republicans AKA kick ass daddy) have MIC scams total corruption. unamused i thought you were more intelligent than the left right physcop.

        • Unamused says:

          i thought you were more intelligent than the left right physcop.

          Smart enough to see through thinly-veiled corporatist propaganda designed to undermine their enemies. I can also spell.

        • Cas127 says:


          “Left or Right hasn’t mattered for a long long time, they are all in on the scams.”

          Looking at how the dollar (the shared store of value) has been abused for decades, it becomes less and less possible to see DC as anything other than two mafias competing over the protection racket money from their distinct constituencies.

      • BobMinik says:

        Petunia, et all
        I don’t want something for nothing.
        Long time reader (Testpit days) first time reply. Wolf thanks for all you do and a shout out to the commenters. Usually first rate commentary.

        I’m living in a “shelter in place”, “lockdown” state or whatever foolish tag they want to put on it. I find it ironic and humorous that the only people allowed to leave their safe shelter are those individuals whose jobs are critical or essential to a functioning society. You know, us under paid, under appreciated lower class blue collar worker who actually provide something of value or necessity to society. The Governor’s official press release has an extensive list of “individuals that may leave their residence to provide services or perform any work necessary to offer, provision, operate, maintain and repair Essential Infrastructure”. Included in this Executive Order


        is a list of Critical Trades “that are necessary to provide and maintain the safety, sanitation, and essential operation of residences, essential activities, and essential businesses and operations”.

        It’s quite comical who’s not on the critical, essential, or necessary executive order. They can just hunker down and let us under paid working scum get them through this. You know, those important beautiful people who put on their suit and tie, or their professional pants suit and make more money this month then I’ll make busting my ass all year. Before I read the reply comments that I should have studied harder and been “one of those” also, it should be known that I am a licensed HVAC and Power Engineer. I know mine and my fellow hard working blue collar men and women’s worth and value to society. It would be nice and I feel essential if we were financially compensated for the value we add to a functioning society.
        There was a time that a skilled tradesman could buy a house, purchase a car or two, send his kids to college, care for elder parents and in-laws on his salary alone. That isn’t possible anymore.
        If anything good comes of this, maybe it’s – the day of the working man has retuned!

        • Petunia says:

          I know your trade well, in NYC it has always been one of the good paying jobs. If you are in Illinois you are well paid and over taxed. In the south you wouldn’t have that problem. BTW, you could retire rich if you took a job in Detroit, ask your union.

        • Root Farmer says:


          Sorry to hear about the impact this is having on you. I read the executive order and it specifically calls out trades such as HVAC as being exempt. What am I missing?

        • BobMinik says:

          Root Farmer

          You did miss my point.
          Critical Trades and Essential Infrastructure, along with many others ie truck drivers, grocery store employees, warehouse workers, nurses, etc etc etc are all exempt and out there working and not “sheltering in place”. Us working stiffs are valuable and critical to a thriving and functioning society. It’s time we were compensated as such.
          Maybe the day of the blue collar man has returned.

        • Root Farmer says:

          Thanks for the clarification. Got it and I agree. We may be entering a period where the people who get well compensated are those who hold the true means of production, both skills and tools of trade. My concern remains that the forces that have intentionally glorified greed and diminished the “dignity of work” by labeling blue collar work as for suckers or worse.

          It will take a significant shift in values for this country to assign value to those whose daily contributions have the most critical impact. Is that a fight that people are ready for? Those who believe in profiting from a rentier economy will not just give up.

        • p coyle says:

          @root farmer

          surely, with all this downtime, some smartypants will come up with an app for this conundrum. the downtrodden, productive working person will finally have his day in the sun!

      • wkevinw says:

        Petunia. I am not sure I agree with giving money to the people, but it might be worth a try. Unfortunately, it’s “more of the same bailout mentality” leading everybody to expect a bailout every time there is an economic problem in the future.

        Your observation that this kind of (ridiculous financial) stuff has gone on regardless of the party “in power” is true. Even the current POTUS is practically as much of a “big government” proponent as previous occupants. (like him or not… which appears to be the bigger issue politically at the moment.)

        • Petunia says:

          As a mental experiment image giving $1k to the most well off person you know and $1k to the poorest person you know. Also image what they will spend the money on, tell us how you think each would spend it.

          I give money to homeless people. I don’t care what they spend it on. Most look like they could use a meal. If they spend it on booze and drugs, they are still supporting the economy, and maybe not committing a crime to get a few dollars.

  16. Unamused says:

    It’s all about time.

    TPTB has a lock on the country, just like last time.

    The government will save the rich, just like last time.

    The rich will hoard the money overseas, just like last time.

    Everybody else gets thrown under the bus, just like last time.

    And the time before that.

    US unemployment is expected to head north of 30%. That’s new.

    It’s Weimar time in the US. That was expected.

    • The Colorado Kid says:

      No, Weimar comes later.

      “Turning Japanese” by The Vapors comes first.

      • Petunia says:

        Weimar is here now, party over country.

      • 2GeekRnot2Geek says:

        Second up is “Mexican Radio” by Wall of Voodoo.

        • Bet says:

          I have read in history. The time that fascism comes is in times of great economic upheaval. Well…..
          We already have corporations making laws hand in hand with the govt. now I guess it will be made official

  17. doug says:

    I need to issue some bonds ASAP.

    • Keepcalmeverythingisfine says:

      First you need to find a company to asset strip, then you need to load it up with debt and pay yourself huge salary/bonuses, and then you issue some junk bonds, and finally you get your bailout. Otherwise, no bailout for you!

      • Cas127 says:

        Selling junk bonds only works if there are buyers, and buyers have been hugely motivated (and in the case of significantly underfunded, corruptly political public pension funds almost compelled) to take ever larger risks by the ZIRP policies/interest rate repression of DC…which has to have ZIRP to keep itself and its corrupted economic ecosystem alive.

        • p coyle says:

          i have a feeling the buyer of last resort has finally showed up, with a new, bigger punchbowl. everyone will be paid what they feel they deserve.

  18. Keepcalmeverythingisfine says:

    Have no fear, the Fed and Congress are here:
    Financial system bailout = unlimited
    Your bailout = $3,000 (family of 4)

    • Bobber says:

      People will spend most of that money on Chinese goods if they don’t put restrictions on it. Is now the time to stimulate the Chinese economy? They should put the cash on prepaid cards that can be used only for stimulating the US economy, not China and Jeff Bezos.

      • Unamused says:

        People will spend most of that money on Chinese goods if they don’t put restrictions on it.

        You might like to hold off on that until Fearless Leader wins the trade war, about fifteen days or so.

        • Cas127 says:

          And how much has either party done in the last 20 years to address the industrial ascendancy of China?

          Besides print money to cultivate an illusion and hide politically problematic decline.

          Trump has a lot of flaws…but seeking to diversify away from China isn’t one of them.

        • Shiloh1 says:

          Goes back at least 27 years, that Billy Jeff preacher.

        • p coyle says:

          where i live, toilet paper, hand sanitizer, 9mm and 5.56 rounds is what that free money will be spent on, if the last few weeks are anything to go by. assuming, of course, that any of those items show up on a vendor’s shelves that is…

  19. Anmol says:

    Wolf – thanks for your research on the current state of QE, I think you posted it on Friday. Sadly, now that the FED has announced QE-Infinity, its already outdated. I hope you will do another piece on the current state of the bailout market.

  20. doug says:

    My word is Bond, ……Junk Bond…

  21. RD Blakeslee says:

    Fundamental plain talk: Disregarding all the labels and “code words”,

    There is not, for now, any “distressed debt”. The fed just went all in and will buy it all.

    Only when the populace at large discovers their “money” isn’t worth what they’d been giving it credit for, will collapse and re-set happen.

    Think a minute about what the words “money” and “credit” mean in my context.

    • Unamused says:

      Think a minute about what the words “money” and “credit” mean in my context.

      In another context, ‘currency’ and ‘plastic’ could mean ‘mode of transmission’. You can see the logic: thousands of lives can be saved by making sure the general population doesn’t get any money.

      • RD Blakeslee says:

        I get your point.

        What do you think mine: My my conviction, that the populace will eventually lose confidence in money?

        • Unamused says:

          Lose their religion? It’s happened before.

          It’s not as if Americans have any money anyway. All US paper currency is plainly marked ‘Federal Reserve Note’, just so everybody knows it’s their money, and not yours. They’re just letting you use it.

        • Gordian knot says:

          The dollar has a intrinsic lean built into it. During a national emergency / meltdown all assets / collateral can be confiscated or nationalized. you did not use constitutional money GOLD to buy your home. you used IOUs with a lien built into it.

    • VintageVNvet says:

      Sorry as I am to see this, I am totally in agreement with your first declaration, NO such thing today as ”distressed debt.”
      However, I do not agree with the idea that collapse and re-set will happen when people discover that their money, once again, is worth Less, though I agree that will be the case, deja vue all over again.
      Unfortunately, my clear experience is that most people have no clue how worthless their money is from decade to decade, not to mention the century+ that We the People who work and save have been subjected to the continuous degradation of the worth of our money/savings/labor by the FED. This information, at least the official version, is easily available on the USA BLS site.
      In spite of Wolf’s rule of no politics, in fact the only solution to this continuing degradation of the USD is political.
      ”Clean House, Senate Too” really should be the mantra of all voters, voting in only new people every election at every level — local, state, and national, until we get politicians at every level who represent the best interests of all of We the People, and not just politician/puppets on the strings of the rich/oligarchy/whatever you want to call our owners in fact, if not in nominal title.
      If I knew of a website/forum as sane and civilized as this one devoted to politics, I would go there and lay out the four or five Constitutional Amendments that will at least give us a good start back toward, if not on, the path USA started on after the war against the monarchy of Britain.
      Please LMK if there is such a thing on the net these days.
      Thank you.

  22. gorbachev says:

    I’m with Petunia.Trickle up.2000 a month for every family

    whether you need it or not.Taxable of course.

    • Unamused says:

      Aren’t you afraid they’ll just spend it on alcohol and drugs?

      • VintageVNvet says:

        I promise to spend MY $2000 ASAP on the BEST of my favorite wines, especially because that will help the winery folks who I adore, as well as all the transportation folks in between the wineries and me, as well as many of the manufacturers of many other products in USA and their transportation and middle person folks. ( BUY USA! )
        You might ask why the others; very simple: Whenever I have a bottle of really good wine, (as opposed to the fairly good wine that is my normal fare,) I almost always get on the internet and find something, that may not be a real need, but will be at least real fun for somebody and ship it to them (including myself, of course.)
        Overall, according to my most recent calculations, every $50+ bottle of wine I consume adds approximately $200 to the GDP!!
        So bring on the $2000, or perhaps double it for me,eh

      • joe says:

        Cheerful devil aren’t you?
        Contribute value? Ever heard of it?

        • VintageVNvet says:

          Yeah joe, heard of it once or twice while working and contributing to SS, etc., etc., for well over 50 years, including up to 2019,,, so i have finally accepted a huge request to stay home and help take care of 90+ year old in laws instead of gallivanting around the country doing my best – and being well rewarded for it — to help companies that need my particular expertise.
          And doing my best to ”keep on keeping on,” including spending all my income and having fun!!

  23. “Companies whose loans trade at distressed levels have a very difficult time borrowing new money to meet their cash flow needs, pay interest, and pay off maturing debts.” Top of the list, USG. Powell is telling you something, like any company facing bankruptcy, they pile all the debt into a subsidiary and spin it off. When corporate yields start running, yield chasers put their track shoes on….

  24. Iamafan says:

    Wow. Welcome to ZERO interest rate!

    Term: 13-Week
    High Rate: 0.000%
    Investment Rate*: 0.000%
    Price: $100.000000
    Allotted at High: 98.17%
    Total Tendered: $142,182,613,200
    Total Accepted: $47,003,986,200
    Issue Date: 03/26/2020
    Maturity Date: 06/25/2020
    CUSIP: 912796UA5

    *Equivalent coupon-issue yield

  25. RD Blakeslee says:

    Unamused, What do you think of my conviction that the populace will eventually lose confidence in money, with its now unlimited expansion?

    • The Colorado Kid says:

      RD, deflation will make the USD stronger at first. Purchasing power will increase even with the printing. You need velocity of the printed dinero to get inflation and that’s just not going to happen for awhile. Additionally, right or wrong, this runs on fear & emotion and the USD is perceived worldwide as the ultimate safe haven and if you look at how other fiats are behaving, you will see why. If you wanna “stack” right about now, I would be stacking USD
      It appears, at least for the time being, that Brent Johnson is being proven right in his “Dollar Milkshake” theory.

      • Shiloh1 says:

        I remember around this time of year in 2008 Mish saying it was a good move to max out HELOC and keep the cash for safety. Interest rates even lower now, low carrying cost. Once someone on the block gets foreclosed or sells out on a real lowball deal, and it shows up in public records and zillow, then the lenders will quickly reduce the the potential equity to be used by everyone else nearby.

      • Noelck says:

        Yes but Brent Johnson admits that the dollar will eventually collapse. Are you really good enough to time that? We better hope that Schiff and Johnson are at least partially wrong.

    • Unamused says:

      In times of trouble, people tend to cling to their religion, and people worship money. So don’t count on it.

      As David Korten (When Corporations Rule the World) has pointed out, money is a mechanism of control. Most people have been made dependent on a system which requires them to trade their labour for money. It’s a system where the avoidance of poverty depends on increasing the wealth of somebody else, and almost everybody has bought into it, or else.

      Alternatives have been systematically excluded and are largely unavailable. That’s a feature, not a bug, because profiteers do not want people to be the least bit self-sufficient. It’s unprofitable.

      Doesn’t necessarily mean they won’t lose confidence in it, but really, what choice do they have?

      • RD Blakeslee says:

        Thanks for your reply. I believe your analysis holds true, in the short run. After that, “what choice do they have”?

        Revolution, if the authorities fail to re-set currency on something they will accept and believe in. Too much surveillance and control for that? Well, the authorities cannot control death itself and sufficiently desperate people will act out Patrick Henry’s famous dictum: “Give me liberty or give me death”.

        I personally think a reset would be based on precious metals, with their widespread familiarity – jewelry and other exposures. It could be something else. Some believe it will be decentralized blockchain currency, etc.

        • RD Blakeslee says:

          I would add that there is a very long history, which progressives discount, of gold as money.

        • Jonas Grimm says:

          Blockchain is not remotely stable, and is energy intensive to boot. Until a major power invests in it wholesale, it’ll stay that way. It’s a fad, and unless regulated in some fashion is just as open to fraud as modern modes of money.

          Meanwhile gold, while still theoretically open to inflation thanks to mining, is vastly more stable. The gold supply is closer to a fixed quantity. Unless someone wants to start asteroid mining, it’ll still have scarcity value. And the laws of nature state that energy-intensive complex systems tend to revert to simplistic forms under crisis. Whether that’s still an option is up in the air, but it could happen…

      • VintageVNvet says:

        Choices, and the logical ”end game” of the corporate hegemony that has developed extremely past logic in the last 50 or 75 years, (depending on which war you think it began expanding from,) has already begun.
        The best current models are:
        1. Companies that are 100% ESOP owned.
        2. Companies where every single worker is in the same Union.
        3. And there may be some coops, such as the Hoe Dads, or other similar set ups that will also work out the kinks in that concept going forward.
        Eventually these kinds of arrangements of equality will prevail; though I will certainly concede at 75 that it will not be in my lifetime, I hope it will happen within the life of my grandchildren.
        Be of good cheer UNA, now is the time to ”eat, drink, and be merry, because tomorrow we dine.”

    • economicminor says:

      I think we are on the road Venezuela took and there may be nothing useful that the money will buy.

      Or Zimbabwe..

  26. HollywoodDog says:

    All of this government-backed debt, leveraged loan, QE Extra Premium talk has exceeded my comprehension. But I am cognizant enough to know that there is no sense in bailing out industries that just aren’t coming back (brick-and-mortar retail, commercial real-estate, possibly cruise lines,…) or specific firms that never had a path to profitability (Uber, Lime, WeWork,…). Is there any chance that we won’t spend money feeding dead horses?

    • Much depends on how quickly things pick up, for cruise lines, and theme parks. Meanwhile I see a renaissance in brick and mortar. Some 3D printing companies may step in and fill the supply chain void. Need a part? Have it made. I would also give any company which exploits inefficiencies in markets, like transportation, Uber and Luft, or in RE, Zillow, as positive outcomes. There are way too many restaurants, which is far too wasteful of food. In the first GD restaurants did well. My favorite group is the credit agencies, as we move past money into the buying and selling solely on credit. Corporate debt can downsize and emerge much stronger than it was.

  27. Saylor says:

    Kaiser, Humana, Blue Cross…, are these guys going to have any money left after covering all this virus action?

    • Unamused says:

      Not in the US. They’ll do what every other corporatist does: hoard it in the Caymans and complain that they need bailouts.

      Medicare For All would be half the price and more effective, but that would cheat the tax havens and must be defeated at all costs . . . none of which will be covered by the profiteer class.

  28. joe says:

    Blah blah blah. When financial betting closes , the house wins. And who is the house you ask?

  29. “Cumulative Credit Losses”

    Thanks Jerome!


  30. sierra7 says:

    Don’t confuse FED policies with general financial charity work!
    I don’t know how many times this kind of “bail-out” has to happen before the majority of the US (Global) citizenry realized they’ve “been had” (again)!
    I can’t believe the gullibility of this country!
    Mostly, “sheeple” with a capital “S”!
    And, they continue to do it to themselves by participating in the maniacal consumer plan which is just a road to financial and societal Hell……in a not too straight line!

  31. Iapetus says:

    Leveraged loans will probably be the first class of corporate debt to sustain massive defaults and credit losses. But many others will soon follow. Corporate debt has for the last decade been used to finance too many unsound business strategies including stock buybacks, leveraged buyouts, special dividends, and to support cash-flow negative companies which don’t sell enough product to finance their daily operations. As a consequence, corporate debt repayment was under stress even before the appearance of Coronavirus. According to Morgan Stanley:


    “Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, estimates that one in six U.S. companies does not earn enough cash flow to cover interest payments on its debt. Such “zombie” borrowers could keep putting off the crunch as long as debt markets kept letting them refinance. But now a reckoning is coming.”

    And according to the International Monetary Fund:


    “The IMF’s latest global financial stability report amplifies this point with a simulation showing that a recession half as severe as 2009 would result in companies with $19tn of outstanding debt having insufficient profits to service that debt. Overall, this huge accumulation of corporate debt of increasingly poor quality is likely to exacerbate the next recession.”

    Keep in mind, these estimations were made before Coronavirus.

    • Cas127 says:


      “Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, estimates that one in six U.S. companies does not earn enough cash flow to cover interest payments on its debt.”

      Zero interest rate (through Fed money printing) = problem solved.

      This is DC’s solution for its own unsustainable debt load as well.

      DC financially survives by confiscating the earning power (and soon the principal) of private savings, which have already passed through the tax gauntlet once.

      Money printing is just the mechanism, wealth confiscation is the necessary element.

  32. raxadian says:


    So is all the terrible goose fault then?


  33. Paul says:

    Wolf, Any thoughts on how the collapse of the oil price might affect Buffet’s investment in BNSF?

    The airlines are getting lambasted but so is rail.

    • Wolf Richter says:


      Off the top of my head, without trying to dig this out, I think BNSF is more impacted by coal than crude oil. And coal has been a railroad nightmare for years. Intermodal (container and trailer freight) was way down too BEFORE the virus. They’ve all been laying off lots of people BEFORE the virus. The virus piled on top of it.

  34. DawnsEarlyLight says:

    if these companies receive government assistance, they should not be allowed to declare BK!

  35. TownNorth says:

    Too bad all those companies that did share buybacks weren’t doing it today, instead of at the peak and financed with debt.

  36. Social Nationalist says:

    The Fed didn’t own enough treasuries to matter. It’s a 40 trillion dollar market.

  37. Norma Lacy says:

    to Unamuzed. Despite your nom de plume, I am frequently smiling when I read your comments. Thank you! And thanks to Wolf especially, and to all the wolfers and wolfettes. Cheers.

  38. kitten lopez says:

    hey i wanna aplogize to you, Unamused, for expecting you to have The Answers. i felt like you were like that magic fortune devil in the old twilight zone episode where william shatner wouldn’t leave the diner because he was addicted to the cryptic fortune tellings it’d spit out on little cards.

    i am twisted in my secret colored girl Defiance, as well as my self-entitled white girl who was brought up to believe I Can Make a Difference!

    i am living in the contradictions dichotomies and hypocrisies, and thus what isn’t true in one area, might be true in another.

    i was talking to James about RD’s plan to buy land. that seems locked up and over but it never really WAS, was it?… James reminded me of what happened to Joe Bageant’s poor white family and how land was tricked away, taken away, taxed away, eminent-domained away. so “owning” land is (shrug)… not safe, either.

    so i’m feeling trapped. trapped with a WORLD that will take it on the chin for More Stuff.

    i don’t see any revolts happening, but nor do i want people to take to the streets, because as Killer Mike said, “revolution is just another opportunity for black men to get shot in the streets.” / and i don’t want ANYONE to get shot in the streets because such badasses will be few, far between, and necessary for any on-the-low moves.

    so i’m the one who went beyond the bounds of the agreement here, where comments are supposed to be just talk.

    but i don’t believe that. / i’m back to believing my gut, my intuition, my idealism… because i don’t win by being WRONG. i’d rather risk finding or being prepared for the bird crap that undoes the electrical grid or the friction factor James was trying to explain to me regarding engineering calculations. he said you can’t account for FRICTION. you can’t measure it or plan it.

    THAT is the kind of talk that gets me ready.

    so you’re right, Unamused:

    There is Nothing We Can Do.

    i watch this site and the news to see how They’re Handling It, and (shrug)…

    same old same old.

    i’m blue not because of the lock down; i’m blue because the working class and the poor are used to getting in the teeth and up the ass and this won’t be a snapping point; it’ll be a new normal to get used to.

    so Unamused… if it works for you and your energy to talk about how crappy and hopeless it all is, go for it. maybe that’s part of what has to happen, where the conversation has to go. i know nada.

    i’m thinking you’re right.

    but if you were talking about your “girls,” and they are your daughters, i hope you come up with some ideas even if for them and not the rest of us shmucks.

    if they are your background singers, i STILL hope you will come up with ideas to save your background singers.

    but i think you are either a guy alone typing in your garage, or you got lucky on your smarts early on and bought an island and are populating it with your progeny. so if those “girls” were among your progeny, you’ll STILL wanna come up with New Ideas beyond a shrug and “nothing to be done” for them in case one of them ever wants to leave your Unamused Island.

    i was hoping this corona thing was gonna End the Age of Bullshit. James says i’m idealistic. James is sounding a lot like you… until he starts talking about things like stackable tolerance or that accounting for ALL the variables that are insignificant or significant..

    i know nada.

    but i’m sorry for expecting so much of you, too much of you.

    i always love arrogant snide funny people who seem to Know Everything. i get to feel like you all are holding back; but you’re NOT.

    you’re a regular scared clueless shmuck like the rest of us.

    but everyone’s talking and no one’s TALKING. testing talks against REALITY.

    this is why i’m over “writing” in a huge personal way. i need to flounder and get back to the mindset that once had me fixing my own VW bug’s broken accelerator cable with a rusty hanger i found on the roadside and a rubber band.

    so please accept my apology. it’s all talk and i’ll let it be just all talk.

    i was just famished for IDEAS. new ways of thinking fighting doing…

    i shouldn’t have put too many expectations on you. maybe it’s because you spell things like “honor” like “honour” and that made it older more real. more legit.

    • noname says:

      I enjoy your posts, Kitten. I will read this most current post when I have a few more minutes and tea in-hand, but wanted to tell you that ***when I read your posts, I think of Tracy Chapman and her “Fast Car” song***. I trust that excites you :)

      • kitten lopez says:

        i’m so uncool. in san francisco you don’t look twice at famous people or film crews or you’re quietly escorted out the back door.
        so 15 years ago or so i go into Chow’s in the castro and Tracy Chapman and her look-alike sister are walking out as we go in. because i speak before i think, i smile at these two gorgeous strong black women passing before me and yell, “oh my god you look like a ROCK STAR!”

        and my friend took a deep breath in like i was gomer pyle yelling GOLLY!–and i realized she WAS a rock star and they smiled politely but i felt like i’d just farted in the whole place.

        so that’s all i think of when you say her name. one of my most uncool moments because around other colored girls i wanna be SUAVE, you know?

        • noname says:

          I knew you’d have a story!
          I don’t know much about her, so I mostly meant the passion of the lyrics she sings.
          When was the last time you listened to it?

          You got a fast car
          I want a ticket to anywhere
          Maybe we make a deal
          Maybe together we can get somewhere
          Any place is better
          Starting from zero, got nothing to lose
          Maybe we’ll make something
          But me, myself, I got nothing to prove

    • Unamused says:

      i wanna aplogize to you, Unamused, for expecting you to have The Answers. i felt like you were like that magic fortune devil in the old twilight zone episode

      I am magic, Kitten, but my range is limited. Even with their rings Elrond could only do Imladris and Galadriel could only do Lórien, and all I’ve got is my sparkling personality. Having all the answers isn’t very helpful without the right questions.

      As for the TZ ‘Nick of Time’ episode, Don Carter ended up telling off the mystic seer and leaving with his wife to make their own future. You might like the X-Files episode ‘Je Souhaite’.

      • kitten lopez says:

        your words are so sharp and perfect they slice icicles cleanly down the MIDDLE.

        i’m only going to bury myself deeper instead of OUT as i admit:

        yes, Unamused you ARE magic. and for now i will have to accept your defense of your human limitations, as i’m struggling with my own, but i don’t BELIEVE in your own supposed “limitations” anymore. that bores me and is a cop out and has got to be totally uninteresting as a CHOICE for especially you.

        i apologize for being a bitch but still, as an artist and thinker and human being fumbling forward… i want you to go to what’s NEXT.

        because you “get” everything. you get that it’s TIME FOR THE RIGHT QUESTIONS.

        and you’re cheating the WORLD if you just stay comfortable with your clever autopsy remarks and riffs on the sidelines.

        i will admit that i do very much believe that this is a once-in-a-lifetime gift and opportunity to have the world all stop at once like this.

        i believe in people like you also stepping up to dare to give too much of a damn and change the rhyme the story.

        so talk talk talk.. get all these great observations and one-liners out of your system but you’re too fxcking smart and will soon bore of your own glittery cleverness, if you haven’t already.

        that’s where your magic will go next. it’s bigger than your sparkling personality.

        thing is, no one can sit out what’s next, Unamused. no one.

        that’s why EVERYTHING feels different. i think there’s going to be a return to shameless love need and earnestness. giving a damn.

        but point is:

        i’m not done with you, though. that’s why i really apologized. because if i ignore you, you’ll know it and be lazy, and then i’ll storm off and have even LESS than i started with.

        but i’m a writer, i’m patient, and i know how this stuff works: if you think i’m even “maybe” still reading you, and know you’re capable of higher thinking, i’ll very likely get more of what i truly want by asking for it, being patient and appealing to your VANITY.

        and even as i tell you EXACTLY what i’m doing, it’ll still work!



        p.s. THIS is why i know women were NEVER truly the weaker sex. i’m the stupid woman in the group every time. like the homer simpson girl who steps on the business ends of rakes and even I KNOW HOW TO DO THIS. these are older women lessons, though. women are more about going head to head with men now. that’s silly. you have to detach from ego and observe and plan and plot. i learned ’em from my mom because as a boss she always taught me how to look at the rougher edges of folks and make ’em sharp for things on purpose.

        • Unamused says:

          THIS is why i know women were NEVER truly the weaker sex.

          According to the Notebooks of Lazarus Long, whenever women have insisted on absolute equality with men, they have invariably wound up on the dirty end of the stick. What they are and what they can do makes them superior to men, and their proper tactic is to demand special privileges, all the traffic will bear. They should never settle merely for equality. For women, “equality” is a disaster.

          I have no idea what this has to do with distressed corporate debt, but if I thought about it I could probably figure it out.

        • kitten lopez says:

          what it has to do with distressed corporate debt is that while They are doing what They do, we pipsqueaks are waiting as if we’ll be taken care of somewhere down the line.

          there is a “death” of energy philosophy and art that could MOVE counteract… do something with this by inspiring or educating people.

          i think artists philosophers thinkers and elders people who “know” things are shaman, priests, leaders.

          i think you don’t realize how powerful you are as a thinker or writer. funny people are ahead. truly funny people are mad smart.

          i put you in there. / society makes little of such roles -esp now- and it is my job to call out bigger powers when i see it.

          Wolf looked at me with the same “you’re kidding” look when i said his site was special beyond money. i’m used to it but don’t care anymore.

    • RD Blakeslee says:

      ” i need to flounder and get back to the mindset that once had me fixing my own VW bug’s broken accelerator cable with a rusty hanger i found on the roadside and a rubber band.”

      Kitten our bug broke down on Sunday, somewhere near the Tappan Zee bridge, on the way back from Baxter State Park in Maine, about fifty years ago. I fixed it, but didn’t have to use “pickup” materials as you ingeniously did. But it was Sunday, no cellphones, etc.

      You know where to read the whole story, if you are interested. “Grandfather Says”, “The Family Trip to Maine”.

      • kitten lopez says:

        i WILL look at your stories!
        analogue era triumphs are REAL.

        man… my own VW story was when i wasn’t even yet 20 and it’s STILL one of the highlights of my life. i rub my own nipples whenever i remember it.

        anything i’ve pulled off as a grown up since then pales dramatically next to the look of the guys’ faces when i drove up to the garage across the street from the gas station where i was on my way to work at… the guys used to bust on me because i tried to be so tough and loner girl, and then they were in AWE!

        but when i was young and broke down a lot from my adventures, accepting road side help often had me in some hot water from the “appreciation” some might’ve thought would come from me.

        so i had a lot of incentives to learn how to take care of myself or be charming and CLEVER while being eternally grateful and keeping my HONOUR intact. (wink)

        the accelerator had a rubbery delayed effect from the rubber band part of the connection, but that was part of its charm til i got around to fixing it.

        i think this is related to what all this new technology has done to our real life problem solving skills. i feel like if we just look at this in a different angle…

        but that’s where stuff gets “mystical.” but mystical isn’t mystical anymore. it’s ANIMAL.

        Wolf went back to “animal.” that’s why he wasn’t ever afraid of me and thinks i’m mushy.

        Anyhow, Daddy (RD)– you make looking up your writings WORK. that’s good. i do the same. make us WORK for the knowledge and appreciate it and you.

        funny me calling you Daddy like that. it just came out one day and it felt natural so i kept it. / never called anyone but my DADDY, “daddy.” / i miss him. so it feels good. thanks. damn. you got my eyes watering again.

        why do we people have to make things go to shxt so often? we’re mad holy and sweet and amazing.

        ah.. back to the wrong questions!


        • RD Blakeslee says:

          “i WILL look at your stories!”

          Oh, begorra! My third disciple – the others shall remain nameless here – they would never admit it publicly.

          Let’s see: Peter was Christ’s third disciple. Maybe I should call you kitten peter – nah, that won’t work …

    • Tom Pfotzer says:

      Ms. Lopez…may I have leave to call you “my dear Ms. Kitten Lopez”?

      I read your post to Unamused the other day, and wrote you a reply which I didn’t post, as I felt I might be meddling. I thought your post was a most lovely expression of pure altruism and the hope that others share that wonderful trait.

      I can certainly understand your frustration with Unamused. S(he) is clearly playing this game with a well-appointed hand.

      What isn’t said is occasionally even more useful that what is said. The intellectual tension that Unamused creates is – and as an artist, you may appreciate this – is akin to a veiled or obscured item in a painting. Mona Lisa is captiviating because we’re wondering what she’s thinking.

      My interpretation of Unamused’s occasional reticence is that indeed, “there is no solution”….

      Until you think of it.

      It’s entirely possible that Unamused is goading people. S(he) may have a very good grip on just how rough this is going to get.

      The problems we are currently facing took the entire population several generations to create. They are enormously complex, and the solution to these problems is going to require….each and every one of us to adapt like crazy – like never before in living memory. And no one can do it for us.

      Even if Unamused gave you the cake recipe, in full, right now…it’d be a mighty steep cliff to climb up.

      Which brings me back to that lovely note you wrote Unamused. You mentioned the necessity to make mistakes, to not be detered or emotionally reduced by external skepticism or ridicule. You said several other things which are indicative of great, hard-earned emotional power.

      And that emotional power is 50% of this cliff-climbing game. Technique and situational awareness are the other 50%.

      Wolfstreet provides a good bit of situational awareness. What’s missing now are some tools to help us get up the learning curve on “technique”.

      As I’ve mentioned before, there are several people on this blog who have got the “technique” worked out pretty well for their particular situation.

      That’s a clue: it can be done, but most people aren’t situated well to climb the cliff.

      You have the emotional power to probe and express this log-jam you’re banging against. You’re good at sensing how you feel, and speaking it.

      Nobody else on this blog would have wrote that memo to Unamused. And it wasn’t really Unamused that you were ranking on, was it?

      It’s this ridiculous situation we’re all in that made you mad.

      • kitten lopez says:

        BAM! WOW! KABOOM!

        holy cow what a GIFT

        i will reply anew below later

        i needed to have someone ELSE finally twist my head around…

        thank you


        we have become an odd type of family here because they all have put up with my existential screams in looooong endless columns for YEARS now and it is only BETTER when you dare to step in and “meddle.” / it is how we are real BEYOND the writing and don’t hide.

        (that is my performance art now that everyone is a writer photographer filmmaker… if i feel stage fright one-on-one, then i know i’m in prime territory. one-on-one is WAY more terrifying than a million people)

        more later


      • kitten lopez says:


        Okay, My Dear Mr Tom Pfotzer–

        i listened to music, stretched, danced and thought on this and how i’ll answer you. / i’ll accept your challenge at this new level of depth. okay.. now we’re fucking in public while everyone else has an entirely DIFFERENT conversation. / this is Wolfstreet on the Low… what Hugh Hefner couldn’t even have DREAMT of…

        this is good. i’m made for this. to step up to this… i’ll do it. but i need time to do it right and proper and respectful of the Wolf terms of whatever they’re called. any terms of control i reject out of hand but they are necessary boundaries that create THIS, yes?

        okay. so none of us have much of anything better to do if we’re even on the computer so i’ll answer you AND Unamused.

        because this was all rather sweet actually. i really Unamused thinks he’s just wanking off here and doesn’t see his own power and you see MINE and Wolf knows enough to let this shit run out and actually be more interesting than the ish out there.

        okay. let’s do this. you’ve basically asked me to also explain why it’s all so important to me. you’re asking for Love Letters. okay. i won’t be cryptic but i will promise to be CONCISE and not freak Wolf or anyone out.

        i’m only MEETING you, Meeting THIS. i will answer you with as much thought, if not more, than you gave in writing what you did above.

        and at the same time i will explain you Men to YOURSELVES and thus other women who remember know or forgot. / Petunia knows. i was just trying to get Her to see other men as she sees her Husband, because when they lost everything, they had to see colors only hummingbirds can see in order to stay together.

        what she learned in accepting each others’ humanity at that time losing EVERTHING…

        this is church to me. why this place is Existentially Important. i came back to lurk like a motherfucking asshole instead of daring to speak up and care and fight for the magic i originally saw in here.

        so if i don’t step up and own my vision, i’m nothing. i’m weak. i’ve let the little ones down.

        because there is no God anymore and we need new STORY and i see heroic stories HERE every do dah DAY i come here.

        if i’m worth anything at all i can write love letters this into Being..

        i believe because i’m still here because of James. / you can’t tell me nothing. you can’t tell me this love stuff IS as powerful a force as … pandemics.

        let me shut up. i’m leaking prematurely (giggle)…

        i need to think on this right and proper and will return within a few days with a new reply at the BOTTOM, all fresh and clear and CONCISE (hence the few days).

        this is Good Stuff. thank you for the Dare.

        i feel excited.. this is good. / this is Real.

        you ARE magic, Unamused. see? it’s fun not knowing what’s gonna happen next, isn’t it?

        i aim to make you believe again.

        i told you all Everything’s Different. i had no idea we were Going Here…


        • kitten lopez says:

          and my Dear Tom Pfotzer, if Unamused is a woman, then that’s the butchest woman i’ve ever come across in my lifetime.

          an alpha woman, such as the ones you find here, would’ve told me to go fxck myself from jump. (Petunia, Idaho Potato, Lisa Hooker)

          alpha men encourage this or just smile, ignore me and keep doing whatever they’re doing. and i like either one. the beta types of all kinds try to HUSH me. stop me. eradicate me. i hate that.



        • Tom Pfotzer says:


          I see that I am going to have to run hard to keep up.


          I am an aged, white, pre-Altzheimers’ waif who hobbles with a cane…whose Big Moment is when I get to shout at the crows when they steal the bird-seed.

          Just so ya know what you’re dealin with.

  39. Iamafan says:

    Why so gloomy? If you have been reading this site closely enough, there were some people here saying to be in 100% CASH. Well, I wish to congratulate them. The day has come to spend your principal instead.
    Just turn off watching cnbc and your blood pressure will be lower.

  40. Jeff Relf says:

    The government wants us to borrow, not save;
    so, naturally, they have to bail us out
    whenever the the economy isn’t perfect.

    • Mean Chicken says:

      If you default and your lender is compensated for his losses, who’s the bailout recipient?

      • p coyle says:

        the lender. once you default, the lender gets your stuff. if it isn’t worth what it was once upon a time, the lender gets bailed out by those on the hook for these types of shenanigans. to generalize, this type of sucker is commonly referred to as “the” taxpayer, or more accurately, “the bagholder.”

    • WES says:

      Jeff:. That is why Congress wants to send you $3,000 in Federal Reserve Notes!

  41. Mean Chicken says:

    I wonder if (or at what point) it’s becomes impossible to socialize corporate losses.

    As an aside, my browser isn’t being redirected today.

    • Wolf Richter says:

      Thanks for the update.

    • Cas127 says:

      Mean Chicken,

      It becomes impossible when savers start to exit the dollar for some other, much more trustworthy (systemically undilutable) store of value. In the end, the Feds can only print their favored fiat – they would have to to resort to totalitarian methods (looking at you MMT) to compel its use.

      I’m sure the current corrupt species of gvt will resort to “legality” then some degree of physical force to defend use of its habitually corrupted specie, but it will be like trying to grab air or water…everyone will want to transact in a store of value that…well, stores value…and is not subject to the political motivations of DC.

      DC can only run this scheme so many times.

  42. John Vermeer says:

    I get the feeling The FED will bail out everything, including these loans, Wolf.
    That’s not to say they should, only that they will. We’ll end up even worse off. The Fed will own everything, Capitalism as we’ve known it will be dead.
    Price discovery on everything will disappear.
    Tell me I’m wrong. Please.

    • Wolf Richter says:

      John Vermeer,

      The thing is when an over-indebted company with permanently negative cash flows runs into an economic downturn, it gets into big trouble. If that downturn is a real crisis, it’s probably the end, no matter who buys the leveraged loans. These companies have a great chance of filing for bankruptcy. And then you get 20 cents on the dollar or whatever for the loan.

      In a couple of hours, I will post my article on the Fed’s current bailout programs, each listed in detail. None of them are for anything below investment grade. I think there is a willingness at the Fed to let junk-rated companies with real problems go into bankruptcy restructuring, where they belong.

      • p coyle says:

        i sincerely hope you are correct on the whole “FED lets bankruptcy happen where needed” idea. i can only envision bankruptcy, in its current form, as something only the privileged class of investors gets to benefit from, and generally at the expense of those most unable to bear the burden.

        • I seriously doubt they will allow a wave of bankruptcy. That would imply creative destruction, however the number of new innovative companies is much smaller, thanks to post GFC monetary policies. Most of the large players in the IPO market are recycling old businesses, like Amazon recycled retail. Weworks recycles office space, Lyft, Uber. Tesla recycles the automobile. New products are bitcoin and pot stocks, and Fed won’t defend those even with your money. Can a corporate downgrade hurt VC? I think this is where shadow funding comes out of the shadows, if the last month has proven anything to investors, you cannot trust Wall St. Now the taxpayers will put their foot down, no bailouts? Bankruptcies (pl) are a good thing for any industry which is why the most innovative won’t be bothered at all, and the recyclers have their niche.

  43. cesqy says:

    The Fed is trying to get their balance sheet to match that of the Bank of Japan. The Nikkei was up 334 points last night. I wonder who was buying. Of course with this bailout, the Fed will own most of the world’s assets with unlimited credit and the DOW will never go down.

  44. Michael Engel says:

    Only 3.21% of SPX stocks are above dma200.

  45. MCH says:

    Never fear, the Fed is here.

    It will stabilize the market by buying ETFs… ok, they aren’t buying every ETF, just a couple it seems like:


    But hey, we know where this leads to, there is an example of this somewhere, right? But why stop at some corporate bond funds, just go all in now, buy VOO and SPY. That should stabilize things pretty much right away.

    No, actually, let’s just go to the source now, here is a list of stocks the Feds need to prop up ASAP.


    I’d go on, but then I’d probably violate some kind of length limit on the post I can provide.

  46. Wes says:

    Fidelity Bond Market Tracker: Investment Grade 6 month, BAA/BBB Bond Yield 24.23% as of 6:33PM March 23, 2020.

    Mr. Richter, if you would like an actual screen shot send an email.

    • Wolf Richter says:

      Thanks, Wes. Here it is. The BBB-category is outlined in red. This is the category just above “junk,” and everyone is expecting a large number of downgrades to junk in this group. Click to enlarge:

    • Cas127 says:

      Which of the BBBs have debt maturing in April, May, and June?

      My guess is that that interest rate is really just an artifact/implication of the price declines on the BBB debts trading in the secondary mkt.

      It would be interesting to see if any actual issuance/rollovers occur at anywhere near that rate…because it would mean almost certain BK in a year or two…so why wait…

      It will be interesting to see the bailouts’ impact on BBB credits…which are frequently actually junk credits.

  47. Joe in LA says:

    I’m confused. Doesn’t the new PMCCF program at the Fed basically mean that the Fed is now buying every piece of trash bond in the world? (Link below.) Shouldn’t that cause the market yields to collapse?


    • Wolf Richter says:

      Not quite. Or maybe worse. But only investment grade, and no junk. And not directly. I’ll have my bailout list up shortly which explains all this stuff.

  48. TheRealMRDyno says:

    I didn’t say anything about the virus disappearing, I didn’t call anyone nuts, and I understand the goal is to keep ICU flow below capacity. I just said it seems like this will take a while. With ~100k ICU beds and ~10 day average stay that’s ~10k/day new case capacity. With ~5% of cases requiring ICU that could be ~200k new cases/day at capacity, which is ~2 years to herd immunity. Until we have herd immunity the spread can be very fast, requiring suppression efforts. So, can we suppress it until we have a vaccine in maybe 1 year?

  49. Cas127 says:


    I think the pt may have been that,

    1) Disruption of supply chains at 100% lockdown nationwide, would pretty soon start causing critical supply problems (ie, food) whose consequences would start to approach and pass the consequences of incompletely chained Corona and,

    2) The exponential increase implied by completely unfettered Corona can be partially derailed by regional and/or rolling quarantines in the worst affected areas and continued social distancing (but not 100% lockdown) in the least affected.

    These steps might keep hospitals under their capacity while allowing enough supply/transport so that a second food/critical good crisis doesn’t not shortly hit us.

  50. MarkinSF says:

    Hey Wolf
    The time stamp on each commentary, is that Central time?

    • Wolf Richter says:

      It’s UTC-5. And I don’t change it. So in the winter, it’s on Eastern Time. Now, as you surmised, it’s Central Time. The server itself is physically located on the East Coast.

  51. kitten lopez says:

    to Tom Pfotzer and Unamused:


    (redux because in this episode i’m not perpetuating the old american trope and encouraging washed up old salesmen to give their lives for little blonde american girls… i’m trying to Save Humanity… no sarc tag. i’m serious.)

    My Dear Tom Pfotzer and Unamused–

    so this morning, James climbed up into my bed to cuddle and fall back asleep, as is the custom, but i’d brought wolfstreet up into the bed earlier with the computer (a no no). so my hands were too cold to touch him so in the meantime i insisted on talking about, “how do you RESIST all this that’s coming down?”

    “you can’t.” Damn. Unamused was apparently also sharing my bed.

    “is it getting off technology?… but you can’t…”

    and he said, “any Simple Answer that is The Wrong Answer; i’m only pointing to a DIRECTION. now hush.”

    and then i knew how to respond, for i’ve been thinking about this and what i’m gonna say now that i’ve called you both back here under the bleechers after class.

    ALTRUISM: no. that’s a flat word like “happiness” and are you “happy.” it’s fleeting flat superficial.

    My Dear Mr Tom Pfotzer, no i wasn’t being “altruistic,” but you’re getting at Love. Deep Love and what do i want from Unamused? Nothing but More of His Best Most Powerful Self.

    okay… this is where stuff gets slippery and like looking DEEP DEEP within Woman. beyond the Pink and into the soul….

    i’m speaking not to Unamused here, but Tom because he’s made it clear he’s The Older Man and i loooove older men and this is actually related. all my best loves have been 15, 17, 25 years older than me and when Timbers talks about adoring his younger Brasilan husband and cherishing the five years he had with him, i thought: “yep…that’s how Men love.”

    and I’m getting full on reminders and lessons on just how magical you men are from GAY men… they are the last bastion of True Masculinity allowed to be alive and flourish in all its depths. so Corky and Basul have become my Reminders, my Teachers, and enable me to swagger loudly in my defense of you men.

    where is this going? is this related to wolfstreet and the FED and zero percent interest and corporate bailouts?

    as a black girl runaway, i could go ANYWHERE in america … charleston west virginia as a child or times square in new york in the 70s as a runaway i could be in a college town in amherst mass… brooklyn queens …camden new jersey…santa rosa california… san francisco california and other black people will generally treat me like FAMILY and someone will take care of me.

    when i was 6 years old, and my regular white american mom was alone with my mulatto sister and me in tow, this bow legged ancient dark skinned janitor at my school would never talk. he had just a low rasp if he tried to talk. his wife scowled at me. she was a janitor there, too. they had the tv on all the time with elevator music on and a constant typewriter scroll on the screen, in their janitor area.

    but i had the feeling his wife never said nothing to me because she didn’t much like her husband’s liking me. he handed me letters to bring to my mother.

    i was only six. we were moving a lot. the world made no sense as it was. but she’d take $20 bills out of the envelopes and look upset. i could feel it. i didn’t understand. i loved it when i got pretty envelopes although i never much liked the cash.

    he gave me envelopes a few times and then my mom wrote something back in an envelope and had me hand it back to him. his envelopes stopped and i missed it. but we were soon on the move anyhow.

    i didn’t REMEMBER that until just a few years ago when i “died” as i was. all these moments of magic and giving just blew my MIND. i couldn’t just let myself DIE when i’d been invested with soooo much deep love and strength.

    they were IN me. all the stories. the evidence that this love shit wasn’t just a stupid asshole concept to get someone to buy flowers on valentine’s day.

    i’d felt duped. yet AGAIN.

    but altruism…

    back to altruism…

    no, i don’t challenge Unamused to watch him just become another self indulgent asshole writer with an ego. that’s boring.

    i have so much to say about MEN. and this place. i’m speaking to you TWO in after hours Wolfstreet on the Low…

    to me my parents are super heroes. even though none of us talk, we CANNOT talk. i think that’s par for the course for americans anyhow. but there’s a lot of power fire and broken hearts.

    but as an ARTIST i choose to not let the story end there, and like the men and women who parented me on the fly much like RD here, these moments are intense rich and open up and blossom for DECADES and beyond our lives. i FEEL it. i know it.

    so as an artist who hit the wall on what art and love could accomplish, i had to lose all i thought i was to learn this. i had to play this in real life and make the magic magic by it being only all too REAL.

    and Unamused, that is what i want to call forth in YOU.

    i say Everything’s Changed, because it HAS. no longer do i find the coy evasive comments from your apparent “cat bird seat” relevant in this time (cat bird seat is another lie, which even you know as we see the perfect example of the perfect baby boomer guy, Paolo, lose his own best friend because NO ONE IS UNTOUCHED BY ANY OF THIS. i’m out of metaphors as this pandemic is the metaphor of ’em all right now).

    so it’s not ALTRUISTIC for me to try to get you to go somewhere new, i know not WHERE, just that the detached hip snarky thing… it’s cruel now. children all the children are fucked and being cute now is like pointing and laughing at drowning puppies if you hate humans, which i definitely understand because i struggle to love us as it is.

    when i said women used to love deep expansive and long, i wasn’t putting down MEN. it’s not an either or. i find we’re out of the dance. we’re out of balance. it’s not a “gender” thing as much as an energy thing.

    my father was a player. had apparently thousands of women, and that number was back in the ’80s when the girlfriend at the time found his Little Black Book. i was only 10 and i knew enough to think, “Little Black Books are REAL?”

    i was secretly proud of my father and as his girlfriend confessed all she did to destroy him, i thought, “what right have you to ruin his book???”

    women would tell me things as if just because i had a vagina, i would agree. i often didn’t.

    see, i saw what my father went through to love a woman. it was what i later realized i put into EVERYTHING i loved. he’d play operas blaring through the apartment, taking HOURS to slowly prepare.

    it was epic.

    and i saw the women flourish blossom and i heard the sex screams in his room and they’d come out all flushed, hair wild, faces pink. for he loved white women.

    i think he thought he was getting white men back sometimes, but i didn’t see it that way; i saw how much life he gave to those women. i thought they were lucky.

    i came to understand my father years later, as i also have the ability to SEE the best in men and women and i get off on trying to trick them into THEIR BETTER SELVES.

    i have used games to bring people to their lowest selves, but i’m still living with the bad juju even from things i did at age 7, so i try to avoid that sort of cancerous regret at every turn.

    oh, i’ll be bad and do hella bad things. i get off on it. but i have to earn the “right” and it has to be Fair Game. that’s a whole OTHER thing we cannot shall not get into HERE.

    but that does bring me to magic incantations and how as an artist i’m getting that i cannot change or un-do anything, but i can help change the DIRECTION and scatter seeds.

    there is NO UNDERGROUND anymore. and that is my panic. that it’s ALL locked up…

    but then it isn’t, is it?

    it NEVER is. there is ALWAYS escape.

    but back to men and women….

    feminism has lost its way. i can’t do anything there. whatever young women come to me i’ll be tough and test ’em out now, because others have used my advices as “tricks” to manipulate men. small magic it shall remain with them.

    but when they are POINTING IN THE RIGHT DIRECTION, our powers can transcend EVERYTHING.

    coming back from Death with James’ love and acceptance…

    and my neighbor, Rudy, lost his job. / his two retired single guy friends offered to pool their retirement checks they “don’t NEED” (!!!!) and support him. this is MEN!!!!

    on the low, alpha men are the most amazing magnificent idealistic and daring romantic loves. i say alpha because the betas and zedas are scampering around figuring out whose ass they can stick their heads up.

    i am the child of wildly daring and idealistic romantic and tempestuous alpha parents who taught me apparently ALL i needed to know after all.

    and i would make all i know a waste if i tried to fit in with the deadened existing narrative.

    they imprisoned the strongest daring smartest poor and colored folks because they’re dangerous.

    i once got Wolf in trouble because i wrote we’re all xxxxx’s now.. but we ARE. and i see what they did to my brothers, doing to strong white men ALL MEN. all naturally born men.

    it’s no accident we can’t fight anything led by a bunch of beta people.

    so that’s why i can’t completely stay away from HERE.

    and i don’t think it’s any accident that i keep running into other freaks i’ve known in the past on THIS SITE. i first came here and lurked for a long ass time because i was asking: IS THIS SHIT FOR REAL???

    i thought they’re gonna shut this shit down. he’s telling the TRUTH! they’re gonna revolt!

    but nah… as James said, capitalism absorbs EVERYTHING every attack against it every rebellion becomes …bleh….

    but as a “bad” girl i KNOW i REMEMBER that change is easier when you’re uncomfortable and off balance ANYWAY.

    and that’s why i’m being open about my higher expectations of your THINKING , Unamused. you can be as coy as you want, but be GENEROUS. dare to care. it’s in there. it’s not like i’m asking you to be anything other than what or who you are.

    i’m saying EVERYONE’s being smug nihilistic …cold…

    i was in group homes where other kids had crazy shit done to them or things they’ve seen i can’t imagine. i shared a room with a scrapper scrawny little white tomboy girl who saw her older sister get hit by a train because she was trying to save HER and froze on the tracks. she couldn’t sleep without moaning screaming nightmares.

    and when i became legit and tried to hide all i knew, i realized regular people with boring lives were acting just as fucked up and cold and shit was WRONG.

    it was time for me to go ahead to the other side of cynicism.

    i throw people off by being so earnest and looking ’em in the eyes. but i can tell who’s still alive that way.


    i am already trying to push harder in my own. i went to trader joe’s yesterday and the line was so long, staff would pretend they were helping me and confide how they’re getting screwed over with hazard pay, cleaning the store themselves, unprotected all day, and losing bonus pay etc because they’re not union.

    so when my group gets to go inside i raised my fist in the air in front of the managers behind the desk and said “HAZARD PAY OR UNION!” a few times til the manager looked like he was ready to throw me out.

    i went up later and faced him and he tried to winge away and i said “look me in the eye”… i said, “i want you to take care of these people in ways your own grandfather would’ve told you to fight.” he smiled because i got in his little corporate head like a WORM, and i finished, “or else i will take to the street fighting WITH them.”

    and i bowed and looked at him with love.

    because Corky and Basul have turned me onto KALI and i’m reading this old book he gave me RIGHT before the lockdown. / lots of weird stuff happened right before the lock down.

    that’s the other thing i really must admit:

    i believe in Magic again. X-file Twilight Zone type of magic. i thought i was little and made all this up. / nah.. .it’s back for me again. i can’t bet on it for stocks. my grandmother already tried when i came up with ALL the numbers once.

    it only works with life and when i’m scared and RISK.

    but i believe that telepathic and other ways of communicating that are actually just ANIMAL, will kick in. and maybe THAT will be the underground i’ve been missing.

    i don’t know… but i’m doing all i can in daily life to open that place i only used to do in private.

    so i’m trying to love out in the open like my father did, only without actually fucking everyone.

    you’ve gotta be careful with all these magic powers because magicians can just because rock stars for the pussy and then you’re a creepy lonely old man drinking too much and driving fancy cars around in circles in your circular driveway.

    i’m trying to use all my artistic advertising and attention-getting powers to show how the bad asses and alpha dogs aren’t as weak as they now assume they are. i’m trying to show how to love out in the open embarrassingly big and not be embarrassed.

    because become embarrassed in front of WHOM? pipsqueaks who never did anything before this lockdown anyhow???

    so my attention on Unamused is not Altruistic.

    it is self interested. i want MORE. i’m tired of powerless mediocre beta thinking.

    and i’ve been spot on about the handful of powerful people i’ve called out in the past handful of years. maybe they’re not what i saw in MY time line, but it comes out. wait long enough and yeah… you DO see the best in people.

    but i’m calling all alphas to step up.

    it’s not altruistic. it’s more FUN. it’s more interesting.

    this was long but i had to edit down a BOOK of side riffs and thoughts. because i’m IN IT right now.

    but you’re Right, Unamused. and you’re wrong.
    you’re right about “fuck it.” / you’re wrong because you’re letting that keep YOU small.

    and Mr Tom… thank you for daring to go deep and make me THINK.

    we need the mystical powers of men like you all here. i see it all over the place in here.

    i’m trying to awkwardly do en masse, what a woman used to do one-on-one.

    but that british writer John Gray (not the venus one), he said when community breaks down you can’t get it BACK.

    so i cannot fix or save anything.

    i can only REMIND you of who you already were are or wanted to BE.

    that is my specialty. that is why i’ve ever been here. that is also why people are afraid of me…


    so i want YOU to believe in the magic of CHANGING stories mid-stream. it may not happen on the time we want, it may happen generations from now …whatever changes we want… but what i learned from being a black little girl is that we take care of the next generation and hand down the lessons to HOLD ON, IT’S A LONG GAME / PASS ON THE KNOWLEDGE TO THE LITTLE ONES…

    we cannot afford the LUXURY of cat bird seats anymore. Paolo lost his best friend already and this shit JUST started. and where’s Alex from Digital Detroit?

    this shit is REAL… i’m fighting like i have no face left to save.

    i’m begging… Unamused… you are a romantic. it is harder stronger and more generous to show how you really care how you really wanna fight and use that intelligence.

    and i’m okay with giving you shit and asking you to take your voice and your message more responsibly because people read you. they enjoy you. don’t keep humor cheap. that’d be a WASTE of all your powers.

    but that’d be a waste of MANY people’s powers here.

    all this power and everyone acts like someone else is in charge.

    that’s the danger of this TRAINING. when you “make it,” you’ve been re-trained.

    so it’s not altruism when i want people to do well because unhappy people are why we have what we’ve got.

    my mom said there was no point in ever doing deals where both parties weren’t happy because it wouldn’t work. / my dad said when you fight and gouge another’s eyes out, now you’ve got to lead him around. / and James told me that force costs too much and one day you can’t just FORCE everyone to do what you want.

    so it’s not “altruism” as much as it seems like common sense to have powerful people come back to themselves and challenge things so things don’t just have to be a constant shitty slog to the bottom.

    there is BEAUTY here…

    and i can’t just be a passive female on my back waiting for the flowers to come to me. i must GIVE them first.

    ya, dig?

    this was long but i’ve been THINKING on it this whole time and this is SHORT for what it is my head.


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