The Downgrade Massacre Has Started

Just astounding. So many downgrades in just of a couple of days. And zero upgrades. Here’s who got hit.

By Wolf Richter for WOLF STREET:

I get “Moody’s Daily Alert” in my inbox, which lists Moody’s ratings actions for the day. The Alerts are usually a mix of a few upgrades and a few downgrades. Many times, there are no downgrades. Earlier this year, it became obvious without counting that the downgrades were starting to outnumber the upgrades by a large margin. But this week, the three Alerts were a torrent of 69 downgrades and zero upgrades. This is something I haven’t seen since I started subscribing to this service years ago. Some of the downgrades were by multiple notches in one fell swoop.

This ratio of zero upgrades to 69 downgrades by Moody’s this week is a hair-raising deterioration of the already downgrade-heavy ratings actions so far this year. Moody’s has now downgraded over 180 companies this year, 69 of which I got in my inbox just this week!

In addition, these Alerts contained a torrent of warnings about “ratings on review for further downgrade” or “negative outlook,” meaning downgrades, or additional downgrades are to come.

The analysts at Moody’s must be working overtime putting together their downgrade reports, and they’ve fallen behind, and it’s going to take them a while to catch up. Meanwhile, they issue warnings about what they’ve got in their downgrade pipeline.

For example, this week, Moody’s downgraded Ford’s senior credit rating one notch deeper into junk (to Ba2). Ford’s corporate family rating is already Ba2. Moody’s warned that it placed the ratings under review for further downgrade. Moody’s said the ratings “reflect what is an already-stressed credit profile and a very long-term restructuring program. The company is now additionally burdened by the prospect of a severe and prolonged decline in automotive markets precipitated by the coronavirus.”

Moody’s also said this week that it has placed FCA (currently Ba1) under review for a one-notch downgrade deeper into junk, and that it has placed GM’s senior unsecured ratings (currently Baa3, one notch above junk) under review for a downgrade to junk. In Moody’s book, Tesla has always been rated junk (currently B3).

As a reminder, on Moody’s scale, “investment grade” is a rating of Baa3 and above such as Baa2 or Baa1, A3 etc. Junk is anything below Baa3, starting with Ba1, Ba2, etc. Moody’s lowest rating is C for default (my plain-English cheat sheet for bond credit ratings by Moody’s, S&P, and Fitch).

Moody’s one day’s worth of downgrades.

The list below shows the 28 actual downgrades of the final Alert this week, sent out on Thursday. There are some big names. Most of them are downgrades from junk deeper into junk.

  1. Saracen Development: slashed 4 notches deeper into junk from B3 to Caa1 with “negative outlook,” meaning further downgrades are likely.
  2. Sugarhouse HSP Gaming: downgraded one notch deeper into junk, from B2 to B3; with negative outlook.
  3. Churchill Downs: downgraded one notch deeper into junk from Ba2 to Ba3; outlook negative
  4. CCM Merger: downgraded one notch deeper into junk from B1 to B2; outlook negative
  5. Ford senior debt rating: downgraded one notch deeper into junk, from Ba1 to Ba2; “places rating under review for further downgrade.”
  6. PetroChoice Holdings slashed by four notches deeper into junk, from B3 to Caa1; stable outlook
  7. Men’s Wearhouse: slashed by three notches deeper into junk, from Ba3 to B3; ratings on review for further downgrade.
  8. Bruin E&P Partners: annihilated by eight notches, from B2 (two notches into junk) to Ca (default imminent with little prospect for recovery); outlook stable.
  9. Metro-Goldwyn-Mayer: downgraded one notch deeper into junk, from Ba3 to B1; outlook is stable.
  10. Buena Vista Gaming Authority: downgraded one notch deeper into deep junk, from Caa1 to Caa2, ratings on review for further downgrade.
  11. Mohegan Tribal Gaming Authority: downgraded one notch deeper into junk, from B2 to B3 from B2; outlook negative.
  12. Twin River Worldwide Holdings: downgraded one notch deeper into junk, from B1 to B2; outlook negative.
  13. Downstream Development Authority: downgraded one notch deeper into junk, from B2 to B3; outlook negative
  14. Goodyear Tire & Rubber Company: downgraded one notch deeper into junk, from Ba3 to B1.
  15. Dayco Products: slashed two notches into deep junk, from B3 to Caa2, negative outlook.
  16. Cooper-Standard Automotive: downgraded one notch deeper into junk, from B2 to B3; Outlook negative.
  17. Lifetime Brands: downgraded one notch deeper into junk, from B1 to B2; outlook negative.
  18. NN, Inc.: downgraded one notch to deep junk, from B3 to Caa1; ratings under review for downgrade.
  19. Adient’s senior secured rating: downgraded one notch deeper into junk, from Ba2 to Ba3. Corporate family ratings under review for downgrade.
  20. Casablanca’s (Apple Leisure Group): downgraded two notches, and into deep junk, from B3 to Caa2, outlook negative.
  21. Ahern Rentals Inc.: downgraded one notch from B2 to B3; ratings placed under review for further downgrade.
  22. S. Farathane: slashed by three notches, now into deep junk, from B3 to Caa3, outlook negative.
  23. Fetch Acquisition: downgraded one notch deeper into junk, from B2 to B3; Outlook is negative
  24. Spectacle Gary Holdings: downgraded one notch, and into deep junk, from B3 to Caa1; outlook negative.
  25. Blue Ribbon: downgraded one notch from B3 to Caa1 from B3, outlook negative.
  26. The Enterprise Development Authority: downgraded one notch from B3 to Caa1; ratings on review for further downgrade.
  27. Jacobs Entertainment, Inc.: downgraded one notch deeper into junk, from B2 to B3; ratings on review for further downgrade
  28. Peninsula Pacific Entertainment: downgraded on notch and into deep junk, from B3 to Caa1; outlook is negative

On Tuesday and Wednesday, Moody’s hit a combined 41 companies with downgrades. Here are some samples:

  • Three large cinema chains: AMC (largest in the world), Cineworld (second largest in the world), and the Redstone family holding company National Amusements (NAI); all three of them to B3.
  • Midas Intermediate Holdco (auto service centers) to Caa1.
  • A gaggle of companies in the oil-and-gas sector, including Murphy Oil Corporation to Ba3 and Transocean (world’s largest offshore drilling contractor) to Caa1.
  • Darden Restaurants to Baa3.
  • A slew of casino companies, including Station Casinos to B2; CBAC Gaming to Caa2, and Golden Nugget to B3
  • Major hotel chains, including Four Seasons Hotels to Ba3; Hyatt Hotels to Baa3, Marriott’s senior unsecured rating to Baa3, and Aimbridge Hospitality Holdings (largest third-party hotel operator, with over 1,300 properties) to B3.
  • VeriFone Systems (electronic payment and point-of-sale systems) to B3.

So far this year, Moody’s issued over 180 downgrades, of which 20 hit investment-grade companies and 160 hit junk-rated companies. That ratio of investment grade to junk is roughly confirmed in the lists above.

S&P got even busier. Its downgrades hit over 300 companies so far this year, and it has upgraded only 75 companies. But those upgrades have stopped. In March alone, S&P downgraded about 200 companies, and just today, it downgraded 27! These analysts are now working as hard as they can to catch up.

S&P’s one day’s worth of downgrades

Below are the 27 companies S&P downgraded today; and it upgraded zero. This list includes some big names, such as retailers Ross Stores, Burlington Stores, Bed & Bath, TJX, and L Brands (again, my cheat sheet for bond credit ratings by Moody’s, S&P, and Fitch):

  1. Noble Energy: Lowered to ‘BBB-‘; Outlook Negative
  2. DuPont de Nemours: Downgraded To ‘BBB+’ On Weaker Macroeconomic Conditions; On Watch Negative; Debt Ratings Lowered
  3. PS Holdco: Lowered To ‘B’ From ‘B+’ On Weaker-Than-Expected Credit Metrics; Outlook Negative
  4. Centennial Resource Development: Slashed three notches to ‘CCC+’ From ‘B+’ On Sharp Drop In Commodity Prices; Outlook Negative
  5. Logix Intermediate Holding Corp.: Downgraded To ‘CCC’ On Economic Impact of The Coronavirus; Outlook Negative
  6. Alliance Resource Partners: Downgraded To ‘BB-‘; Outlook Stable
  7. Glass Mountain Pipeline: Lowered To ‘B-‘ On Expected Higher Leverage; Outlook Negative
  8. L Brands (Victoria’s Secret, Bath & Body, etc.): Lowered To ‘B+’ On Expectation For Weak Demand Amid COVID-19; Outlook Negative
  9. Continental Resources: Lowered To ‘BB+’ From ‘BBB-‘ On Weaker Credit Measures, Refinancing Risk; Outlook Negative
  10. Covanta Holding Corp.: Downgraded To ‘B+’, Outlook Stable; Debt Ratings Lowered
  11. BDF Acquisition Corp: Downgraded To ‘CCC+’ From ‘B’ On Expected Weak Performance, Liquidity Pressure; Outlook Negative
  12. Matador Resources: Downgraded To ‘B-‘ On Weaker Credit Metrics, Tighter Liquidity; Outlook Negative
  13. National Amusements: Downgraded To ‘B-‘ From ‘B+’ On Reduced Liquidity, Ratings Remain On CreditWatch Negative
  14. International Car Wash Group: Lowered To ‘B-‘ On Impact Of COVID-19 On Traffic Levels; Outlook Stable
  15. Antero Resources: Downgraded To ‘B-‘ On Difficult Market Conditions; Outlook Negative
  16. Bed Bath & Beyond: Lowered To ‘B+’ On Operational Headwinds Exacerbated By Coronavirus; Outlook Negative
  17. Winnebago Industries: Lowered To ‘B+’ On Anticipated COVID-19 Impact; Outlook Negative
  18. Cirque Du Soleil Group: Lowered To ‘CCC-‘ On Significant Liquidity Pressure; Outlook Negative
  19. HighPoint Resources: Downgraded To ‘CCC+’ On Liquidity Risks; Outlook Negative
  20. The NORDAM Group: Downgraded To ‘B’ On Possible Coronavirus Ramifications; Outlook Stable
  21. Specialty Building Products Holdings: Downgraded To ‘B-‘ On Impact From COVID-19 And Recessionary Pressures
  22. Ross Stores: Downgraded To ‘BBB+’ On Performance Challenges Stemming From The Coronavirus Pandemic, Outlook Negative
  23. Burlington Stores: Downgraded To ‘BB’ On Operational Pressures Amid Coronavirus Outbreak; Outlook Negative
  24. TJX: Downgraded To ‘A’ On COVID-19 Related Operating Disruption, Weakened Credit Metrics; Outlook Negative
  25. Thor Industries: Lowered To ‘BB-’ On Anticipated COVID-19 Impact; Outlook Negative
  26. Dayco: Downgraded To ‘CCC+’ Due To The Effects Of The Coronavirus Pandemic, Outlook Negative
  27. National Fuel Gas Co.: Downgraded To ‘BBB-‘ As Lower Price Assumptions Weaken Credit Metrics; Outlook Negative

Just one day’s work: 27 downgrades, zero upgrades.

I can just see the analysts working overtime trying to get all these reports out the door. And when they’re done downgrading their universe, the cycle starts all over again with more downgrades and more warnings about future downgrades.

The pace at which this is now happening – the pace that kicked off over the past few days – is just astounding. And it shows to what extent credit ratings agencies are suddenly motivated to catch up with the reality of this Financial Crisis.

Fed’s assets spike to high heaven to bail out the imploded Everything Bubble it had worked so hard to inflate over the past decade. Read… Helicopter Money for Wall Street

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  188 comments for “The Downgrade Massacre Has Started

  1. Gandalf says:

    Not gonna be too many corporate bond ETFs that the Fed can buy up then, eh? Unless the Fed gonna buy junk bond ETFs also

    • VeryAmused says:

      Maybe they will just pass a bill that states only the Fed can rate companies.

      Then everything can be investment grade!!

      I want to believe I am joking.

      • iindie says:

        I, for one do not believe this isn’t remotely a joke.

        • Obviously the people working at the ratings agencies are not following the mandatory stay at home order. If they did we wouldn’t have this problem.

      • Thomas Roberts says:

        It’s more likely the government would try to reclassify the lower ratings as investment worthy. Possibly, they would try to remove the investment worthy and not levels entirely. They would also push against companies being lowered to junk.

    • ewmayer says:

      They can easily change their asset-quality rules to permit to buy junk, should they so desire.

      So, another huge rally week next week, then? Because bad news about the real economy means more Fed helicopter bucks on the way for Wall Street.

      • wkevinw says:

        Is it easy for them to change their rules like that? I don’t know.

        I know some of the items they were buying during the 2008-2009 period were challenged as illegal by somebody. I don’t recall the outcome, but I guess the Fed “won”.

        If they can buy anything, then it’s really a new low in supposed “markets”.

        • Unamused says:

          Is it easy for them to change their rules like that?

          Why not? It’s always more productive to beg forgiveness than to ask permission, because that way you get what you want.

          Besides, who’s going to stop them? White-collar crime has been legalised.

      • What people (even the fed themselves) don’t seem understand is that buying all this corporate toilet paper, they are starving the $ denom OFFSHORE/EURODOLLAR corporate collateral markets of “high quality” collateral the entities around the world would typically borrow from each other… (hard to borrow against junk rated non USD paper for USD)

        Some people here seem to the the only kind of repo market that exists is the one between FRBNY and its brokest-dealers sucking Jeromes seed at the discount window.

        • Clay says:

          Very true. The Eurodollar shortage problems persist… And also LOL Jerome’s seed…

        • Social Nationalist says:

          Right, except buying corporate toilet paper is not what the FED is doing. Don’t screw yourselves, banks ain’t touching that junk. Instead they will raise retail fees and suck that 2 trillion for themselves. The Fed is irrelevant.

        • GotCollateral says:

          @Social Nationalist

          Well they’re not buying HY toilet paper yet but I very much consiser the 45% BBB “IG” markets as toilet paper as well. Black rock will make sure that FRBNY gets the best IG toilet paper off its investors hands… ;-)

        • Wisdom Seeker says:

          It’s a race to get the BBB “IG” paper into the Fed’s hands BEFORE Moody’s and S&P hit the downgrade button. Then Fed (and by extension taxpayer) is stuck with it. And the banksters skate free off to infect their neighbors in the Hamptons or wherever they set up their bug-out country cottage…

        • rhodium says:

          I confess I’ve never understood this financial industry collateral markets stuff very well even though I read and try to understand Jeffrey Snyder over at Alhambra. Anyway, to what extent the Fed is actually sopping up what’s already in shortage in these collateral markets it suggests that a lot of entities in the world want or need way more treasuries. I guess that makes sense then how the 30y and the long end yields dropped so low. I only got half the gains I could have thinking it was virtually impossible the 30y yield could have dropped as low as it did. Still learning not to discount extreme possibilities. The world likes its sigmas apparently.

          Anyway, as long as the worldwide financial industry isn’t reformed, maybe the govt should just send us more checks paid with debt ;) everything is stupid anyway.

        • Martok says:

          @Wisdom Seeker,

          Your explanation makes sense, and the “rigged markets” continues while common folks get trashed.

          “It’s a race to get the BBB “IG” paper into the Fed’s hands BEFORE Moody’s and S&P hit the downgrade button. Then Fed (and by extension taxpayer) is stuck with it.”

      • max says:

        If corona does not clear by summer, FED ( American taxpayer ) is going to need to bail out whole west world.

        it is going to be The savings and loan crisis on a world scale.

        • Shiloh1 says:

          There are only 3 ways I’ve seen the game Monopoly end:

          Winner take all.

          Players losing get up, do for snack, bathroom, etc. and don’t come back.

          Somebody says F it and dumps over the gameboard.

        • robt says:

          Savings and Loans was different. The government ‘deregulated’ them government-style by allowing them to borrow in a soaring interest rate environment but still requiring that they lend money at 6%.

        • Christopher says:

          Agreed. FED will bail out households, companies and government entitites in the USA. Next round of the game: are they willing to bail out the rest of the world? Think about developing countries, offshore entities, Southern Europe… Another USD,00 might do the job but maybe more is needed.

          And in the last financial crisis the FED thought lowering interest rates would save the system. It took them quite some time to find out they need to take more drastic actions and started QE.

          These days they started with QE and think the problem will go away. But that sounds too easy for me… Will be interesting to see what tricks they will pull off the hat.

    • char says:

      C-19 hits travel(oil ,cars ,planes etc) and places where strangers come together (restaurants ,cinema, casino, retail, etc.). Everything outside is not hit directly by it but only by the economy itself. So for example Netflix bonds should be a safe investment.

      ps. some humor but C-19 does mean they have to send less on new content so for Netflix this is good if the economy isn’t hit to hard

      • Gandalf says:

        People are struggling, ya think they won’t cut back on their Netflix subscriptions?

        Netflix bonds already junk at Ba3.

        ATT with big debts also.
        I think this will be an ideal time for the content owners, all of whom seem to be starting their own streaming services, to jack up prices or refuse to sell to Netflix to drive them out of business

        • char says:

          If i look at what Netflix offers in the Dutch market it is almost completely own (co-)productions so i don’t see how that would work. Especially in a time that a) movie theaters are closed and b) set are also closed so the content owners have no income.

        • William says:

          Netflix is so cheap I don’t know how they make money. No one is going to drop it

        • char says:

          It is still cheap because we are still in the introduction period. They have already lost their first free month and will raise their prices more. All stocks are overvalued but they will become a huge moneyspinner

        • Unamused says:

          Netflix is so cheap I don’t know how they make money.

          They don’t. They’re a unicorn. They’re not in business to make money. They’re in business to weasel their investors and get corporate welfare. Popular business model these days.

          The US doesn’t have an economy. It’s mostly a collection of rackets.

        • Deanna Johnston Clark says:

          Maybe one day people will wake up to the health effects of the sunshine vitamin D and the germy, unhealthy effects of central climate control.
          The giant convention hotels here are empty…people are eating outdoors getting carry out.

      • intosh says:

        Netflix relies more and more on original productions to distinguist itself. If productions cease, Netflix will be hit severely.

        • Phil says:

          Once coronavirus tests become plentiful and fast I can imagine closed movie sets with daily testing of all members. The key to recovery is TEST-TRACE-QUARANTINE

          Everything else is spinning wheels in mud

        • cesqy says:

          Movies on internet will become free like p**n. Courts and internet cops won’t cross borders to enforce bans.

      • Christopher says:

        In Italy and Spain any non-essential business activity came to a stop. It is easier to count the sectors still open, basically food and medicals. Basically a wartime economy model.

        Several other companies will follow suit.

        Here in Germany something crazy is happening: if a private company is in trouble because of Corona (who isn’t these days?) they can reduce weekly hours to 60%. And the government pays the full wage. Read this: any company in Germany can now reduce their labor cost to zero if they reduce work hours by 40%!

    • Cruiser says:

      The Fed will have to buy pretty much everything to forestall deflationary collapse (eventually we’ll suffer inflationary collapse instead). But from the Fed’s perspective what does it matter? The dollars they conjure out of thin air aren’t promises of anything so the Fed doesn’t have liabilities in any practical sense, despite the terminology they use.

      • Unamused says:

        The Fed will have to buy pretty much everything to forestall deflationary collapse

        They seem to have enough money to buy out the planet.

        That should frighten you.

        • Cruiser says:

          Technically the Fed can conjure no end of fiat currency from thin air since the US dollar isn’t a promise of anything. They debase through nothing more than accounting entries, no printing required, when they “buy” assets. Unfortunately accounting entries don’t actually create wealth and there will be painful consequences for such behavior eventually, as has always been the case through human history.

          Doesn’t frighten me personally since I’m ready for the consequences but I do feel badly for all the people who worked hard, lived prudently, prepared for the future yet are going to suffer a dreadful financial future through no fault of their own.

      • S says:

        >>The Fed will have to buy pretty much everything…<<

        I'm still trying to figure out the new U.S. ponzi scheme. The Federal Reserve can't buy anything outside of its mandate. So the U.S. government will buy all the "assets" outside of the Federal Reserve's mandate and the Federal Reserve will fund the U.S. government directly. It's a nice shell game.

        Got precious metals?

        • Wolf Richter says:


          “I’m still trying to figure out the new U.S. ponzi scheme. The Federal Reserve can’t buy anything outside of its mandate. So the U.S. government will buy all the “assets” outside of the Federal Reserve’s mandate and the Federal Reserve will fund the U.S. government directly.”

          No. This explains how it works:

        • Cruiser says:

          The law can be changed to facilitate debasement operations at the Fed. The choices at this point in the secular financial cycle are deflationary collapse or inflationary collapse. Politicians will choose inflation since they would be wholly blamed for deflation but they can actually profit politically by blaming inflation on greedy corporations, evil foreign governments, etc. None of it will be true but perception matters in politics, not reality.

    • GotCollateral says:

      The idea is that Black Rock starts buying investment grade toilet paper on FRBNY behalf first, then when it gets downgraded the tax paper gets to hold the bag like usual.

    • mike says:

      I am surprised that the downgraded ratings are not worse. This will go on for months and many companies are so over-leveraged that they will not be able to pay their creditors for a long time: any government aid will be needed for future payrolls, rent, electricity, and basic services to keep going: bond holders will be last in line.

      This was discussed for a very long time in this and other websites. Over-leveraging has long been endemic.

      I do not know why we are bailing out various categories of companies with few prospects, except that they have powerful lobbyists: cruise-ship companies and other, similar businesses will require massive capital injections to survive and have doubtful futures.

      I certainly would not consider going on a cruise: imagine going on a cruise ship for your vacation and having the reported airborne version of Ebola discussed by long ago one author infecting your ship or MERS. Before this is over, as more ship borne infection incubators are found, ships will be seen as more dangerous.

      E.g., even the hospital ships helping two cities will have a great problem, which is how do they keep corona virus infections from spreading on their ships. If they had a rapid, certain, inexpensive test, they would have to check each person that came into the ship each time that they boarded their ship.

      Enough of our currently slow, less certain, very expensive tests will not even be available to enable this. I pray that none of my family gets sick and needs treatment in one of those hospital ships. Thus, because of their common rooms, joint, ventilation and common areas, I predict that cruise ship companies will not have a great future for years after this pandemic.

      There are limited funds available to help companies. We must focus on helping viable companies that provide the greatest good for the greatest number of consumers and employees per dollar of aid — aside from essential companies, such as military supplies and medical equipment makers.

      There are limits to the ability of the Fed bank cartel to buy its cronies’s bonds or to buy other companies’ bonds to keep the economy up until fall. The Fed cannot create enough dollars to bail out all businesses (for its cronies through its own QE or for US government bail outs).

      Unfortunately, without some very smart, knowledgeable group of persons allocating aid funds, there will be billions wasted. If congress does not put some competent agency to prevent corruption and cronyism in the distribution of aid funds, as have existed so long in this administration as to other things, I predict that we may go into a depression or a truly deep, long lasting, recession.

      I also predict that this is not the last round of bond downgrades, as our economy necessarily remains on the state governors’ wise lock down. In fact, I believe that free interstate travel means that more and more states will get infected and attempts to reopen will trigger massive explosions of infections.

      In conclusion, prepare for massive numbers of bankruptcies.

  2. 10Xtorpedo says:

    Why worry? 2 trillion dollars will normalize things with more fix from Uncle FED to come… everybody will make their payments and stocks will continue to climb, as will real estate. It’s just a hiccup.

    $1200 for the little people and M/Billions for the big ballas.

    credit will expand and things will gain traction again.

    • cd says:

      yep, another tranche will do it, they need to pound the dollar….
      Then GS, JPM and Blackrock mission complete….with Munchkin in there it was in the cards for a while…the virus was just a catalyst….

      rapid finger prick test coming next week-10 minute read out

      AYTU..look at the volume, huge accumulation algo is most likely done, maybe monday, easy stop at 1.49-1.55 area…..meeting and news next week, CBS this AM…approved by FDA…..

  3. NewGuy says:

    By the time this massacre is over, I wouldn’t be surprised if a few airlines are liquidated.

  4. Cobalt Programmer says:

    If these bonds are getting downgraded, do the big guys like pension funds sell them immediately?
    Do they get 100 cents on the dollar from the buyer? is it wise to wait for the COVID-19 situation to improve?

    On a lighter note, recently in DC area two guys entered a store with surgical masks. They robbed the store. I honestly don’t know what they robbed. Will not be surprised if they stole the masks and gloves.

  5. Timothy J McLean says:

    Wolf, my guess is the capital markets will be closed to junk bonds from now on. Do you agree?

    • sunny129 says:

      Why don’t you check the stock charts of JNK (Junk Bond) & HYG (High yield bond) as of today? Also check LQD, the IG bond 50% of which BBB rated or below!

      JNK went up about 10 pts this week, HYG around 8 and LQD around 12 pts.

      Fed is openly and unabashedly supporting the both those sectors. I could see why, after seeing above downgrades!

      I used to buy only puts on these but after reading (days ago) that FED has opened unlimited spigot with QE to infinity, there was gain potential on going long (calls) on these etfs!

      If the CREDIT world gets sick, so is the Equity/Stock mkt!

      Bear Sterns & the Lehman were the first dominoes to fall in 2008! So Fed will support these, no matter what!
      Today Fed removed ALL RESERVE ratio for Banks – O%

      No more Fractional but FICTIONAL Banking!

      • GotCollateral says:

        Well be very careful, the short interest in HYG two weeks ago in HYG was around 40% on March 20, now its up to ~50%[0][1] of the OI Which makes me think this whole rally in HY credit was just a way for institutional writers to load up even more for the next leg down.



        • sunny129 says:

          I am quite aware of that! Been in the mkt since ’82. Didn’t lose any thing during GFC but lost later under Crony capitalism

          I had initially had puts on JNK, HYG and also LQD but were slowly declining and then I checked, what’s going on. If the CREDIT mkts cracks it will affect stock mkt, in a worse way! So Fed is supporting them, at any cost!

          I bought calls on them with puts as hedges.( always to protect against the unexpected whiplash + spikes aka bear traps, typical in a secular Bear mkts!)
          Minimal direct buying of those ETFs for income but to watch them!

          If NOT for corona virus some thing else would have come, along the way and uncovered all the ROT underneath our Financial/global banking system. Debt became the panacea for all the financial problems both in public/private sectors, all over the World!

          What we are witnessing today the consequences of insane credit creation by Fed/CBers was NEVER unexpected but already preordained. it was just a matter of time!

    • Wolf Richter says:

      If the yield is high enough, there will be buyers to take that risk.

      • Davebee says:

        Scary list there Wolf but even scarier for this Pilgrim. Last night Moody’s downgraded my home COUNTRY, South Africa as well.
        You know Wolf I’m a retiree male aged 73 and every night I praise the good Lord that I resisted them Sugar Birds called Financial Planners temptations and kept my little nest egg out of their Living Annuity portfolio NIGHTMARE.
        Thanks for the list, it has been sent on to several “advisers” who now so richly deserve it!

        • They closed the gold mines for 21 days. I love SA, as an EM that can really come out of this better off. The health people are worried that if or when Corona hits the continent they don’t have the hospital facilities. Flattening the curve does not lower the exposure, it extends the same number of cases over a longer period of time. I see that as a possible cause for infecting nations off the G20 radar where most of the infections currently are.

      • Wes says:

        Exactly right Mr. Richter, those who do their homework correctly stand to gain.

      • sunny129 says:

        I never believed in this SURREAL mkt of my life time with absolutely no fundamentals but constantly supported my insane credit creation, from the very beginning. The structural problems which brought us GFC NEVER got addressed but covered with more debt on debt!

        I knew this day will come now but never could imagine that was Corona virus! I am afraid worse is yet to come!

        Very good charts and graphics!

  6. Stephen G Romey says:

    Junk on the bunk (an old term from the Marine Corps, but somehow it seemed appropriate to the bonds on display here)

  7. Tony says:

    “The Big Short” good movie — down into a CDO it goes. I mean should we still trust ratings agencies? Hold on. Let me grab my tinfoil hat. :)

    • Tony says:

      oh…I have a quote. “Tell me the difference between stupid and illegal and I’ll have my wife’s brother arrested”

      • DR DOOM says:

        Tony: getting arrested can fix someone of not doing it again and is discernaible from stupid in that you can’t fix stupid. My wisdom comes from the late great Ron White.

    • char says:

      Casino’s were downgrade but that was not something you could have foreseen in November. So i do think it is different this time.

      • char says:

        Movies are claimed to be anti-cycle. Don’t know if that is still true but if it is than normally movie theaters would be great. Now not so much.

        • Shiloh1 says:

          Many of the inner ring suburb drive in movie theaters were redeveloped into shopping malls back in the day.

        • Wisdom Seeker says:

          “Movies” are anti-cycle. Movie theaters, not so much.

          Pay-per-view or pay-movie services are going to get hit too. There’s plenty of free entertainment out there.

          The one essential service is the Internet connection.

  8. Paulo says:

    Terrible information. I was, for just a quick second, surprised the tribal casinos were in the junk zone, then it became obvious there is more to an industry than a building with tax fee status and people will to lose their money.

    A 70% service economy doesn’t look very sound to me. Never did, really.

    When this is over I think all of us will be more local and living less opulent lifestyles. Think early 1900s with some tech juice and conveniences. Got salvage? We’re all junkmen, now. Pun intended.

    • Tony says:

      I disagree. I think once the floodgates open people will go out to eat. I know when they stop all this “shelter in place” stuff….I can’t wait to go get some sushi and a nice beer. Stay positive, guys.

      • Tinky says:

        Would that include the tens of millions who are now unemployed, or had less than than a few hundred dollars saved for emergencies?

        Sure, there will be some pent-up demand, but not amongst a big swath of the population.

        I like optimism, but am afraid that yours is unrealistic in this instance.

        • Tony says:

          We both are furloughed and at home, spending time with the family. It doesn’t always have to be doom and gloom in this comments section. :P

          “Seize the time for now will never come again.” Jean Luc Picard

      • char says:

        They will stop this “shelter in place” when C-19 is under control. I don’t see that happening soon. And it is not government that decides to lift it. People will not go to restaurants when they have a 5% change to die

        • Tony says:

          You’re saying a 95% survival rate to leave my house? Those are some good odds. You can look at it as 5% chance of dying or a 95% of living. Glass half full or half empty?

        • char says:

          5% death or not going out for 3 to 6 months. I think most would choose staying home. But it would kill the economy even if only 25% of the over 60 did it.

        • I’m sitting in a Japanese restaurant right now, awaiting my sentence, I mean to-go order. Remember me kindly.

        • IdahoPotato says:

          If you have a bowl of 100 M&Ms and are told 5 have cyanide, will you still take your pick or avoid them all?

        • WES says:


          As an engineer, the glass is twice as big as it needs to be!

        • Jon W says:

          @IdahoPotato If you are a 60 year old male your baseline annual mortality risk (UK figures) is 0.8% already. At 70 it increases to 2.3%. At 80 6.7%.

          So on your 60th birthday you are given a bowl of 100 M&Ms with one cyanide filled one and forced to eat one anyway. At each subsequent birthday more cyanide ones are placed in the bowl until at 80 there are 15 cyanide M&Ms.

          We need to take precautions against this virus overwhelming the health system, but it also needs to be kept in perspective. At some point we will have to accept a higher death rate to get the economy going again otherwise we will be in lock down for another 18 months minimum (time to develop a vaccine) and a lot of older folk will have downed a cyanide M&M from their annual roulette game while locked up in their homes.

        • Jon W says:

          @Shiloh1 I read the Denninger blog. He has some good points, but his calculation is wrong. The 15% positive test rate is irrelevant to his subsequent calculations, as testing negative does not mean you don’t test positive in the future. Taking this out puts the lives saved estimate at ~38000, not 5700. However, he has a point, that even at 38k extra deaths this year, is that worth crashing the economy? I guess we are about to find out.

      • 728huey says:

        There will be an initial rush to head out to bars and restaurants just to celebrate the virus passing over,but then the reality of unemployment and mass business closings will cause us to have to hunker down again. And even when this virus goes away for the summer in most places, it’s not as though we’re going to dive right back to where we were when this year began. We’ll most likely have rolling lifts on restrictions, with small dining establishments allowing up to 25 people at one time, then 50, then 100, then movie theaters will reopen, then sports leagues (MLB, MLS, NASCAR) will reopen with no fans at first, and maybe small local gatherings like farmers markets will be allowed to open, and only some time after that will people be allowed to move freely, but that probably won’t happen until June at the earliest, and it won’t be everywhere across the country.

        • Phil says:

          Why would it be over by summer? Why that assumption? I don’t plan on taking any risks in public places until there’s a vaccine or a high cure rate that doesn’t involve getting intubated. If people start going out again, the hospitals are going to start filling up again. Unless of course infection rate is much higher than known, in which case we need wide survey antibody testing to reveal.

      • cd says:

        Me too, the best place in the city is closed, love the owners, will be enjoying sushi, sapporo and nice saki bottle soon

    • Social Nationalist says:

      Considering there is nothing else than a service economy that can sustain the market, 70% isn’t all that impressive. Let’s remember, the end of industrial revolution in the 1920’s was the structural reason why leverage and dearth of investment vehicles turned into a liquidity debt boom that years before were marked for production. By the post war era service was booming in growth which is why it felt so good during the golden age of income growth.

      • Lisa_Hooker says:

        No problem. With the Fed we will soon have a 150% service economy. To the moon Alice!

    • Cruiser says:

      Hard lessons will be learned during the secular financial collapse we are likely entering. People will no doubt become more conservative with their finances after taking the historic financial blow most people will suffer.

      • I dare say people can hardly AFFORD to be conservative with the Fed rigging the game against them. It’s “guaranteed loss” vs roulette. Maybe Russian roulette.

    • Cas127 says:

      “Got salvage? We’re all junkmen, now. Pun intended”

      If intl trade deteriorates due to a rtn to domestic pdtn, there will be a period where used gds will boom until domestic factories can rebuild.

    • intosh says:

      “A 70% service economy doesn’t look very sound to me. Never did, really.”

      This crisis exposes the US’ major weaknesses. When you rely on someone else to make the vast majority of stuff, you are vulnerable. Lawyers, financiers and MBAs can’t make masks, nor build equipments and hospitals.

      The other major weakness is private-centric healthcare system, which adheres to just-in-time supply management, plus underfunded, handicapped governmental agencies, and in many areas, even non-existent.

      • Cas127 says:

        Every time a gvt agency fails at its defined task, it claims to be underfunded…and in general, the American people go along…pumping more resources into that agency…naively thinking that inputs guarantee output.

        Overall gvt spending has vastly increased over the decades, and a very strong argument can be made that overall gvt performance has gotten *worse*.

        The fundamental political problem is oversight…Specifically the lack thereof.

        *Spending* money creates political power and cultivates the opportunity for campaign donation graft. Playing Lady Bountiful is always popular.

        *Policing* the spending of money…does none of those things…in fact it works against them. And so it faces habitual malign neglect in re-election obsessed DC…which exists as a political culture/class unto itself.

        • intosh says:

          For every one failure you read on your favorite mainstream media, there are 10 successes that went unnoticed. The nuclear threats suppressed by agents working in the Department of Energy are rarely known to the public. Early tornado warnings from the people at NOAA that saved lives remain unknown to the indoctrinated average Joe. That’s the nature of the beast. Most government agencies are forbidden by law from advertising or self-promoting. When you hear about them, it’s only when something went wrong. They aren’t even allowed to defend themselves to critique or blame from the media.

          Politicians like Trump are intentionally planting rotten apples and handicapping the public system to further discredit it and fuel distrust. These politicians and their corporate friends work to dismantle public service and to ultimately deliver the sheep to the corporate wolfs — the sheep are the little guys like you and me, and it seems many gladly cooperate.

          If you are serious about “strong argument”, at least try to provide some substance to support it.

    • Xabier says:

      So ‘local’ that we will be 6ft under and not going very far from the home patch, I agree.

      I think I’ll make some rather nice compost myself: probably my greatest contribution to the world.

      The extent and speed of the unravelling of industrial civilisation is breathtaking: the time to stop lock-downs was yesterday.

      We cannot allow decisions to be dictated by physicians and epidemiologists, who cannot be expected to comprehend economic issues and the consequences of their policy recommendations.

      • Phil says:

        They’re a lot more convincing than this generation of politicians, and the politicians mostly agree anyway. I think a lot of Americans might feel like I do, that our economy and society needs change anyway. Who is anxious to rush back to minimum wage jobs profiting only the top 1%?
        This is like a free revolution, all we have to do is stay home and let it fall apart.

        • Stephen says:

          Interesting point Phil. I suppose if this thing crashes hard enough, the 1% will actually have to go to work with the bottom 90%. I agree that there is opportunity here for massive social change as the financial infrastructure of digi assets implodes. I don’t see business as usual returning any time soon.

      • California Bob says:

        re: “We cannot allow decisions to be dictated by physicians and epidemiologists, who cannot be expected to comprehend economic issues and the consequences of their policy recommendations.”

        So, if you have a heart attack, you will go to an economist?

        • Stephen says:

          Interesting that you mention heart attacks. You do know that cardiovascular disease is the number one killer in the US and most other countries in the world. Yet, this global pandemic will NOT in any way kill as many people this year as the various forms of cardiovascular disease (MI, CVA, etc.)

          Now, look at how we value risk. Have me closed fast food joints, banned the sale of smokes, fined people for being hugely obese, required all obese people to go on mandatory diets, fined parents for allowing their children to become obese? You get the point. So, cardiovascular disease and cancer will always be our two biggest killers of people, but you don’t see any cessation of our real economy to deal with these conditions.

          We will get over this someday, and the hang over is going to be massive beyond belief, like a 3 day bender in Vegas. We are going to say 10 years from now, ‘well, I guess we kind of overreacted.’ But as I posted above, there may be a hidden benefit here.

        • sunny129 says:

          ‘Yet, this global pandemic will NOT in any way kill as many people this year as the various forms of cardiovascular disease (MI, CVA, etc.)’

          Facts so far other wise, those with pre existing conditions with Lung, Heart, Diabetes, Obesity succumb more easily b/c already depressed immune systems. The total # deaths of those diseases matters little when the RATE of death with corona compared to common cold (Rhino cirus) In Italy across ALL ages is 10%, 70+ 16% and 80+ 24%!

          Btw the 3rd or the 4th of death after Cancer and cardiovascular diseases is PNEUMONIA the end result complication Flu and also Corona virus.

          Read the article at WSJ re how the virus attacks the human body! ( I am a MD – retired)

  9. Jdog says:

    Current credit ratings are as fake as valuations. This is the reckoning where everything gets re adjusted.

    • GotCollateral says:

      Exactly, if you have to rely on credit agencies properly and timely rating corporate/muni toilet paper… well, I have a bridge to sell you.

      • cesqy says:

        This is the credit reckoning where companies, govts, and rating agencies can get rid of junk and blame it on covid-19.

        • GotCollateral says:

          Only if people like us dont keep making noise about how this stuff was rotten in the first place :P

  10. DR DOOM says:

    I am solvent and still alive. Got the “Heck mug ” switched to Full Auto. A dram of single malt will top it all off at midnight.listening to Run through the Jungle . It’s Friday night bitches.

  11. FB says:

    “Men’s Wearhouse: slashed by three notches deeper into junk, from Ba3 to B3; ratings on review for further downgrade.”

    They should be downgraded for having poor taste in suits. Their financial statements are another matter entirely.

  12. Satya Mardelli says:

    Is this the same outfit that rated Lehman Bro’s mortgage-backed securities at AAA a few months before they failed? Or was that Standard & Poor’s?

  13. A/C in SD says:

    This is scary. I’m heavily invested in Calif tax free Municipal bonds, most investment grade. Up until now I haven’t been too concerned but I’m beginning to wonder if my principle is greatly at risk.
    Can anyone out there give me an informed take on where these investments are possibly headed in the near future?

    • Cas127 says:

      CA gvt budgets have been fiscally aggressive for a long, long time.

      The real question is whether DC will bail out CA (NY too…Gov made noises earlier in wk) w/o IMF style reforms.

      • char says:

        They can always start printing their own money

        • Cas127 says:

          We should wish they would…the US dollar would thereby be relieved of responsibility for CA’s enormous pending liabilities.

          Pay off CALPERS in Disneyland Dollars.

      • Lisa_Hooker says:

        DC will not have any money left after bailing out Illinois and New Jersey. ;-)

    • MD says:

      Only you can say whether your principles are at risk.

      A decent financial adviser may be able to tell you whether your principal is at risk, however.

  14. Iamafan says:

    Who’s lending anyone now?

    There might be distressed debt purchasing, but who’d funding a new Corp issue even if they’re still investment grade?

    • Beardawg says:

      Bailed out banks will not lend to anyone – ala 2009-2014 – they will just feast on the .0025% cheese.

      • cas127 says:


        Too few people understood how the interest on idle reserves operated as a stealth recap of the TBTF BKs…even while keeping inflation monster partially caged.

    • GotCollateral says:

      Lending is still going on, but 3 month LIBOR to 3 month UST spread is like 100bps, back to 2008/09 levels lol

    • Shiloh1 says:

      Observation from 2009-2011, if a house in the neighborhood is foreclosed or sold ~ “half off” in a distress sale then unused HELOC will vanish for all those nearby, no matter the lender.

  15. Randall Hooker says:

    Classic scene for The Big Short. Moody’ interview.
    Are they in CYA mode now?
    Very timely….

  16. timbers says:

    America is a Third World nation with a primative barbaric healthcare system and third world government totally unable to deal with this. I predict soon America will end lockdown because corporate profit. Or….the Fed will increase even more it’s bailouts of Wall Street.

  17. KPL says:

    What happens if the IG bonds that the Fed picked up gets downgraded? Do they have to sell it immediately?

  18. TownNorth says:

    “Moody’s Daily Alert”…this seems like a great tool to have. Is it easily available on their web site, or a paid subscription service?

    I have to think that the cost of Medicare for all, or some form of universal healthcare with a more robust hospital system, would have been less expensive than the stimulus package + the debt write-downs + Covid economic collateral damage.

    • Wolf Richter says:


      Here’s the signup page. It’s free. However, to read most of the reports linked in the emails, you need to have an account.

    • timbers says:

      Medicare for all costs about half of what we currently spend on healthcare. It saves us money. The reason you didn’t know that is because corporations run our nation.

    • MD says:

      Also much less expensive than endless, pointless [religious] wars in far-off dusty places which serve to do nothing apart from create misery and destabilize the world even further.

      Which is the answer to give these boss-eyed, right-wing idiots who keep parroting the ‘but how do we pay for it hur hur hur’ line that’s put into their feeble brains by propaganda.

      • timbers says:

        I agree, MD, and add: it’s not just one side who asks “but how do we pay for that.” And sadly, other side actually has a better track record of implementing that bad approach in policy terms (austerity).

  19. MCH says:

    I am just waiting for the end when they downgrade Apple. But I can’t believe they downgraded L brands, people still need bras and panties… right?

    • Wolf Richter says:

      Lot’s of women today think that Victoria Secret bras were designed by men for the pleasure of men, and if you let women design bras, they’d be different. And sure enough, there are now tons of young companies out there flogging bras by women for women. How do I know? Because I’m seeing their ads right here. And you guys who block the ads, you have no idea what you’re missing :-]

      • Xabier says:

        Hmm, I’m just getting ads for gardening stuff and property investment.

      • fajensen says:

        Almost all add I am getting are those damn Fischer Investment scammers and HBO-nordic!

      • VintageVNvet says:

        NICE Wolf!! Great visionary, as usual :-}}

      • 728huey says:

        I have seen the ads for bras and swimsuits for busty women at times, but most of the time I get ads for financial firms or stuff related to what I was reading online before wandering to your site.

        • Stephen says:

          Wowl, are you telling me that I have been getting these crusty old financial firms ads instead of busty women bathing suits ads? Well, they must know that I am over 60 and not in the market anymore for busty women. AI at its best.

      • Shiloh1 says:

        I remember when bras were designed like tail fins of ‘57 Chevy.

        Recently came across a YT video store security camera of marauding gangs looting Muncie IN mall Victoria’s Secret. Who knew??!

      • MCH says:

        I believe that the industry is just another scam to waste precious resources. Ban bras, Liberation from the tyranny of wasteful excess….


      • Harvey Mushman says:

        How do I block adds?

    • MC01 says:

      Apple is unlikely to be downgraded shortly. China is once again open for business (albeit with many precautions) and the company as a whole was in good financial shape before this crisis began. They weren’t buried in debt and with minuscule margins like many of the automotive component companies freshly downgraded by Moody’s.

      L Brands… if the US follows the same curve as the rest of the world their brick and mortar shops will shut down to reopen… nobody knows when. Think online will save the day? Just wait until delivery services collapse like it happened in Italy.

      Oh, and let’s not forget tomorrow marks the beginning of the fourth week of total lockdown in Northern Italy. Much to nobody’s surprise the lockdown is not working: the media have started displaying a cautious optimism but the numbers literally do not add up. New cases should have started to steadily drop off, not barely gone down and stabilized.
      The media tell us this week testing procedures changed: if before only people displaying three symptoms were tested (body temperature of 37.5°C or more, persistent dry coughing and shortness of breath) now all those displaying a single symptom are being tested. But who is going to believe these folks now after the fear-mongering and outright lies of the past two months?
      Anyway this means that nobody has an idea how long the lockdown will last and it seems its effectiveness is highly questionable as well. Perhaps the Swedes were right after all.
      In turn this means that any hope of seeing this crisis solved like China did is long gone. Meaning L Brands will see even their online sales slow to the merest trickle, and that’s if delivery services don’t collapse first.

      And even if we get out of this (because it’s a matter of if not when; China is the exception here, not the rule) I can easily predict what will sell like crazy as the lockdown dies down: booze, fireworks, spare parts for household appliances etc. Surely not something straight out of an eroge. ;-)

      Wolf: I hope you got my mail with attachment. If not I’ll send it back. We’ve had some serious issues with Internet in my area but since yesterday evening we are back in full form. May my telecom people be blessed.

      • Xabier says:

        Online grocery deliveries have already broken down in the UK due to excessive demand by the locked-down home-workers.

        Couriers can no longer guarantee days for delivery, and next-day service is a thing of the past for most.

        So now we are being told to leave our lock-down homes and go the the stores once more!

        Next to hit will be the great packaging shortage.

        Time to end a foolish policy which is doomed to failure, and try other more intelligent strategies to preserve both more vulnerable lives and a functioning economy.

        No point in saving someone this week only to starve in 3 months time.

        • Phil says:

          The South Korea model. Will the US ever get around to it or must the endless suffering and collapse continue?

        • Cas127 says:


          It is an open question how long the full supply chain can operate given close to 100% pct lockdown.

          There may be “plenty of food in the warehouses” but all the grocery delivery companies I have looked at have delays of 3 days to infinity (Walmart) or 5 to 7 days (Kroger).

          Which is obviously survivable but…

          …that is after maybe just 10 days operating in this reverse distribution mode – what happens after the home stockpiles are exhausted…and the remote shoppers are too?

          Maybe the supply chain can adapt, maybe it can’t.

          Regional and rolling quarantines may be the alternative forced on us, if distribution can’t improve.

          But each day/week the near 100% lockdown can be made to last, likely has a significant impact on the growth curve of infections (and therefore hospitalizations).

          If “lockdown removals” are done in a staged, segmented, intelligent manner, the infection rate may increase, but at a more controllable pace.

        • Yancey Ward says:

          The South Korea model. Will the US ever get around to it or must the endless suffering and collapse continue?”

          Nothing wrong with test and quarantine, but trace is simply not possible once you get to 100+ new cases in a given jurisdiction. The people you have to trace and contact grows exponentially.

        • MCH says:


          I think that method is not possible any more in the US due to sheer size. Plus, it doesn’t quite have the same infrastructure in place like SK to handle this.

          There are already outcries that government is getting too much power during this pandemic. I don’t think it will happen here. People aren’t even following social distance rules.

          For better or worse, democratic governments with divided authorities and a free press just reacts too slowly in certain situations. Imagine if Trump in the middle of February invoked national emergency, cut off the US altogether to foreigners, and quarantined individual states, he would be removed from office.

      • Dave says:

        Are you sure about the recovery/drop in cases in China. The CCP did suppress data at the beginning of this Wuhan virus and a few weeks ago they did kick out all foreign journalists. This is not a snark comment as I really wonder what the truth is in China.

        • MC01 says:

          I don’t know about new cases in China and, to be honest, I feel speaking about them is not wise right now. You’ll know what I mean in a few weeks.

          But I can tell that economic activity is more than ticking up in China. I won’t get into the details, but they have started once again to export absolutely needed medical supplies such as face masks, disposable gloves, hazmat suits etc.
          We can say what we want about Chinese authorities, but their people are behaving very generously: most of this stuff has been donated or is being paid for by Chinese companies and ordinary citizens. Apparently the relatives of the expats living here are spreading the word and people are answering the call.
          In fact they are shipping us so much stuff we have to use ordinary passenger aircraft (chiefly Lufthansa and Wizz) filled to the gills with it to bring it here. It’s very inspiring and very touching.

          Which is why I am making this appeal: help somebody in need right now. While keeping your eyes open for requests for money and/or equipment from the local hospital is obvious, look for all those who are being forgotten right now. They need help now more than ever.

        • Synergy says:

          So China recovers enough that they can start selling and shipping PPE. With the US and Europe in lock down and buying more local stuff (i.e. the essentials, bread, milk, produce) that does not bode well for China either. I don’t see demand coming back as strong for all the electronics, cars and other junk from all the unemployed. What is a one time check of $1200 gonna buy us?

        • cesqy says:

          Certain areas of China might have reached herd immunity given the exponential growth of COVID-19. But WHO knows?

      • fajensen says:

        Perhaps the Swedes were right after all.

        Nope. The Swedish brand of nationalism is often expressed in an indirect way through their common attitude to problem solving.

        Given any problem in an international working group, they will proudly go: “In Sweden we have A* model for that”.

        Then they will pull out a mallet and hammer the data and the preconditions and the requirements until everything fits within The Model. It is impossible to make them not do this, one can only stand back and watch the chips fly. The rest of the project will politely ‘work around’ the mallet team.

        In the Covid-19 Just about all their arguments can be traced back to an unquestioned faith in how unique and special Sweden and the Swedish are, how unlike (and better) than Italy, Spain, China, Denmark they are. The USA has hit a nerve here, they follow USA in everything.

        The panic comes once the infection reaches Stockholm in earnest and crushes the health care system, which it will*, because right now everyone are off skiing in Åre. From the virus perspective it is just like that 40000 people football match and marches that Spain just HAD to have!

        *) Usually, the ‘model people’ have One Single Model that is used Always and for Everything and they cannot learn another possibly because that would dilute the value of the first one.

        *) They are in a bad position to start with. The dumb-asses in 2019 fired hundreds of medical staff in Stockholm to fund the latest round of cost overruns for their white elephant ‘Nya Karolinska Sjukhuset’ (from 16 BSEK to 61 BSEK), and then in 2019 they contracted for medical supplies (gloves, tissues, gowns, PPE) with someone who normally imports slush-ice machines, with the entirely expected by everyone else than the Brainiacs in Special Swedish Procurement: Total fuckup of the logistics, which they haven’t quite recovered from yet (Because, If they had, they would not have made the status Classified).

        When Covid-19 hits for real, it will be like a sudden chilli-enema being brutally administered to the entire country!

        • Xabier says:

          An old friend of mine had similar things to say about Denmark when she returned after 10 years in England: utterly smug small country, totally convinced of an innate and distinctive superiority….

          An old human failing really.

        • fajensen says:


          I complain often enough that nothing can improve in Denmark because we are already the best at everything :)

          However, everyone in Denmark knows, because it is a popular subject for discussion, that our health service of today is barely running on the fumes from past glories and that a Danish health-service crisis pretty much amounts to a good four-vehicle pileup on ‘Helsingør-motorvejen’, combined with six people on sick leave!

          ‘Sweden’ does not yet know that dilapidated and asset-stripped-for-privatisation services is a reality they have to deal with in Sweden also.

      • Wolf Richter says:

        MC01, I got your email. Just haven’t had time yet. Should be up this weekend.

      • MCH says:

        I agree about Apple, although they are going to take a huge hit from this. First, the problem was supply, that’s getting fixed now. I think the demand problem is going to stay for longer.

        For better or worse, Coronavirus Is going to cause pessimism to skyrocket, that hasn’t taken hold all across the board yet. But it is slowly getting there, When that happens, use of disposable income for what appears to be luxury items will drop like a rock. People are quickly going to realize that iPhones costing as much as the rebate checks and disposable AirPods aren’t worth it. That will likely precipitate a huge drop in Apple’s business. The only question is the timing.

        • MC01 says:

          I agree wholeheartedly about pessimism, albeit if you are an Apple customer this week you probably got an email about “the new iPad Pro now available on our website”. Yours for the measly sum of €899 including VAT. :-D
          Fate is not without a sense of irony.

        • MCH says:


          “the new iPad Pro now available on our website”. Yours for the measly sum of €899 including VAT.”

          That’s right, who needs food and water when you can have the magic of technology to replace it. You can watch videos on demand. Food and water are just for whiners.

          I am reasonably sure that unless it adapts very fast, Apple has hit its high water mark. But I would never count out the folks at Cupertino for long. Actually, may be the thing to consider is that consumer electronics has hit its high water mark. We’ll see what industry will gain ascendancy as a result.

    • Petunia says:

      Victoria’s Secret sells low quality underwear and they don’t have staff that knows how to fit or size a customer. Knowing how to measure for correct bra size is a skill and their people don’t have it.

      Most men have no idea what a difference the right sized bra makes for a woman’s figure. Unfortunately, neither do most women.

  20. Upstate says:

    When does,
    “Are you fucking serious “
    Become a bond rating?

  21. Keepcalmeverythingisfine says:

    If I recall, during the last crash BlackRock bought up distressed single family homes (with the help of the Fed via Fannie May). Look what has happened since to single family home prices is most the country – 2x, 3x, and even 4x in the best locations!

    This time around it is junk-rated corporate debt, and once again BlackRock is there to help the Fed mop it up. What do you think will happen to the best companies (and their bonds) on this list?

    I know, these companies should be allowed to die-off and bond holders take their beating. What the Fed and BlackRock are doing isn’t right or healthy for a free market economy. I’m 100% with you. However, I am also 100% for protecting my wealth and my family from the ravages of the asset inflation that the Fed and BlackRock are orchestrating. It is a whole new ballgame and you have to get beyond the anger and adjust to the reality.

    • aqualech says:

      What do you think will happen to the best companies (and their bonds) on this list?

      I think they will default on their debt. Share holders will be wiped out.
      That’s the whole point. How did this happen? Too much easy credit, and false economies. I bet most of these companies did share buy-backs. I’m making a shopping list of things like Goodyear and Exxon but am not pulling any triggers yet as who will be the survivors is not yet clear.

    • Wolf Richter says:


      “…during the last crash BlackRock bought up distressed single family homes (with the help of the Fed via Fannie May)…”

      That was Blackstone, a PE firm. It created Invitation Homes, since spun off in an IPO. But BlackRock is the largest asset manager in the world — mutual funds, and the like. It’s easy to mix the two up.

      • Keepcalmeverythingisfine says:

        I’m getting my grifters all mixed up, it is getting hard to keep track:)

  22. RD Blakeslee says:

    As far as accumulation of “money” is concerned, rating a company’s prospects for profitability doesn’t matter. Helicopter money to the companies and their casino players (oops! “investors”) has supplanted the usefulness of such ratings.

    • MD says:

      The International Car Wash group has been downgraded? Does this mean we may have indulge in *shudder* manual labor and clean our own cars.

      Is there an app for that..?

      • Petunia says:

        You can’t call yourself a first world country if you have to pump your own gas and wash your car.

        • Dave Kunkel says:

          In my neighborhood only a few of us old farts still wash our own cars and do our own yard work.

      • Erle says:

        I don’t use their magnificent service because my interior gets all wet from power washing flooding through my rotted through floorpans.

    • Wolf Richter says:

      RD Blakeslee,

      Credit ratings are trying to measure the probability of default in the near-ish future. This is the so-called “credit risk.” For Example, an S&P rating of AAA implies very low probability of default in that near-ish future. A rating of C implies a very high probability of default, meaning impending default.

  23. RD Blakeslee says:


    They even downrated Bob Newhart’s Airline and Stormdoor Company.

  24. gorbachev says:

    Ackman turned 27 million into 2.7 billion.Could I buy

    the same product and turn 2700 dollars into 2.7 million.

    Sign me up.

    • Endeavor says:

      Ackman could also be the 21st century American Boston Tea party symbol when people get a full realization of their future.

    • Iamafan says:

      I think. Mark Yusko recently commented on the General Growth Properties CDS “investment” they had. Interesting. Search it.

  25. Jdog says:

    I don’t think people will understand why they are called junk until they start to lose their investments….

  26. Iamafan says:

    The Fed Leveraged Hedge Fund (SPVs) will go sky high.

    The plan includes loans for distressed companies from a $425 billion fund controlled by the Federal Reserve.

    This means those SPVs that take “investment grade” parked securities can leverage 10 to 1 with the Treasury taking the first $425B hit. Meaning the fund can park easily $4.25 Trillion of debt instruments. Magic.

    Go back 2008 and study the game plan. In 2011, the Treasury had a balance of $200B in the Fed in a fund called SFA to use for whatever they could think of.

  27. Wisdom Seeker says:

    Just want to add that if they haven’t downgraded half the economy already, they are waaaaay behind the curve.

    There are over 3000 publicly-listed stocks and presumably a comparable number of private equity borrowers.

    Leave aside the bogosity of the “BBB” ratings on firms which in any prior year would have long since been “junked”…

    Given the obvious impact of COVID and the rampant distress in the financial markets, there should have been thousands of downgrades already.

    “Analysts – in a bull market you don’t need them; in a bear market you don’t want them.” (G. Loeb)

  28. Yancey Ward says:

    They are way behind the curve.

  29. Bologna says:

    Good work Wolf ,in your opinion what are the chances right now for a US
    Dollar colapse other than the Federal Reserve buying. Who else is buying US ?

    • Wolf Richter says:

      The dollar won’t “collapse” — but after all this settles down, we may end up with quite a bit of consumer price inflation, which means more or less slow destruction of the purchasing power of the dollar.

      • Dan Romig says:

        Perhaps the supply/demand price equilibrium will rise due to lower supply from the effects of COVID-19?

        On the other hand, Polaris and Winnebago are closing down factories due to lack of demand and relatively high inventory. Both companies have been buying other manufacturing firms to expand though.

        Winnebago now owns Chris-Craft boats and last November they, “completed the $343 million acquisition of Nappanee, Indiana-based Newmar Corp., a manufacturer of luxury motor homes.”

        Winnebago is on the list of downgrades from S&P.

    • Wisdom Seeker says:

      Bologna, if you look at metrics of the US$ vs other global currencies, everyone on the planet was buying the dollar. The dollar spiked harder than almost any point in history in just a couple of weeks. The Fed was acting to mitigate the worst dollar shortage anyone had ever seen.

      Sadly, it’s far easier to produce dollars than facemasks.

      Hopefully once the panic subsides and those dollars are no longer needed, the Fed will be able to corral them.

  30. I assume that the Fed backstopping stodgy corporates since 2009 caused loss of purchasing power in the dollar, and stocks went up? Is the forex dollar going to 200, or is the real loss of value going to align with collapsing value in underlying asset markets? The hardest part is understanding how they could strip mine the economy and make everything look better, while underneath the intrinsic value of bonds and currency was dropping. Fed is now assuming that further lowering rates AND providing liquidity is something other than deflationary to credit and money by extension. I have put my real two cents into the inflation trade. Inflation in money happens when you have too much of something that is losing value. Deflation sets the table by reducing supply, profitability and investment. It is 1930 with helicopters.

    • Unamused says:

      The hardest part is understanding how they could strip mine the economy and make everything look better, while underneath the intrinsic value of bonds and currency was dropping.

      Really? I thought it was rather obvious. Low interest rates, skyrocketing debt, share buybacks, asset inflation, rigged markets, tax evasion, it’s a long list.

      The Fed has been in emergency bailout mode for years. That alone should have told you there was an ongoing emergency.

  31. JohnK says:

    4 decades of usury fueled economics coming home to roost.

    People are looking at the feds balance sheet while ignoring the commercial banks. For example citibank +bank of america have a balance sheet larger than the feds. Private commercial bank lending has a larger impact on the economy than the fed.

    The fed balance sheet is mostly comprised of US government bonds.

  32. David in Texas says:


    Is the Moody’s Daily Alert a subscription you have to pay for, or can anyone sign up and get it. If it’s paid, what is the cost?


  33. Erle says:

    Hey, I wasn’t included on the lists.
    My business model is to buy bicycles going to the scrapyard and pair them with military surplus 260V 400Hz motors and sell as a kit by the internet. Softbank is going to be sorely unamused.

  34. Tang says:

    The China route to IPO and corporate grow is now toast
    with Corona virus sudden growth.

  35. YZ says:

    Thanks Wolf for the insight.
    These rating agencies always responsed to events, rather than foresee what’s to come. So are their existence necessary?

    Btw Wolf I miss your sexy weekly voice/summary!

    • Wolf Richter says:


      Their existence is not necessary. Investors should do their own homework. But it’s a business model that is very profitable, so profitable that Buffett bought a 20% stake in Moody’s. And it generally benefits rated companies (who pay for it) and the ratings agencies. I don’t think bondholders benefit, though.

      It would be good if the conflict of interest were resolved — but that’s not going to happen because that’s the business model.

      My podcasts are on hold right now because I have run out of time — and they take a long time to do. Once I’m done with my personal and corporate taxes, you’ll see more podcasts coming down the pike.

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