When Blackstone’s global head of private equity, Joseph Baratta, said Thursday night that “we” were “in the middle of an epic credit bubble,” the likes of which he hadn’t seen in his career, he knew whereof he spoke. Junk bond issuance hit an all-time record in September. IPOs are flying off the shelf. But earnings growth is grim – and plunging. What gives?
Companies & Markets
J.C. Penney And Goldman: Lies, Scams, And Rip-Offs
by Wolf Richter • • Comments Off on J.C. Penney And Goldman: Lies, Scams, And Rip-Offs
Why would anyone buy this crap? No, not the clothes in J.C. Penney’s stores – which practically no one is buying – but the shares it just sold. It desperately needed to raise capital because it’s bleeding cash and won’t be around much longer without lots of new cash to bleed. So it did. At a horrendous expense, overnight, to existing stockholders.
First Cracks (And Losses) In The Insane LBO Craze
by Wolf Richter • • Comments Off on First Cracks (And Losses) In The Insane LBO Craze
It could be an aberration. Or it could be the first visible crack in the insane leveraged buyout craze that has spread across the country: JPMorgan, Bank of America, and Goldman Sachs could get hit with a loss of up to $156 million on the $780 million in junk debt they pledged to sell to fund the buyout of teen-fashion retailer rue21. With consequences for investors.
The Other Reason Why IBM Throws A Billion At Linux (With NSA- Designed Backdoor)
by Wolf Richter • • Comments Off on The Other Reason Why IBM Throws A Billion At Linux (With NSA- Designed Backdoor)
IBM announced today that it would throw another billion at Linux, the open-source operating system, to run its Power System servers. It may be making hay of the revelations that the NSA has roped in American tech companies to perfect a seamless spy network. Linux, being free of NSA influence, would be a huge competitive advantage for IBM. Or so it would seem.
US Stocks Blind To Crashing Earnings Estimates (For Now)
by Wolf Richter • • Comments Off on US Stocks Blind To Crashing Earnings Estimates (For Now)
Corporate revenues have been crummy all year, and earnings estimates for Q3 have come crashing down. A year ago, they were still expected to grow 15.9%, a sign of blind optimism. By Friday, they’d plunged to 4.7%. During that time, the S&P 500 soared 16.8% and the NASDAQ 19.6%. The Fed’s greatest accomplishment. But there is a corollary.
David Stockman – Bernanke’s (Untough) Love Child: The $27 Billion Affair At The Hilton
by David Stockman • • Comments Off on David Stockman – Bernanke’s (Untough) Love Child: The $27 Billion Affair At The Hilton
The idea that LBOs carry massive debt that is never paid down, leaving behind “financial zombies on the ragged edge of insolvency,” defies historical principles of LBOs, writes David Stockman. Blackstone’s LBO of Hilton Hotels is one of these “free market defying zombies” – “one global business slump away from bankruptcy.” And it just filed for an IPO.
“A difficult second half”: Fabulous Excuses By Clothing Retailers As Sales Fall Apart
by Wolf Richter • • Comments Off on “A difficult second half”: Fabulous Excuses By Clothing Retailers As Sales Fall Apart
Men’s Warehouse joined the crowd of revenue-challenged retailers when it reported results and cut guidance. Revenue fell, profit plunged. As with its peers that had already reported, it’s not so much that sales were crummy – gosh, they were – but that the excuses they came up with to keep their stocks from crashing were even crummier.
BofA-Merrill: “When Excess Liquidity Is Removed, It Will Get ‘CRASHy’”
by Wolf Richter • • Comments Off on BofA-Merrill: “When Excess Liquidity Is Removed, It Will Get ‘CRASHy’”
With Q3 GDP growth tracking 1.6%, Wall Street strategists, whose bullishness has been deafening despite realities on the ground, are starting to hedge their bets with some unusually candid analyses. Seeing overvalued assets everywhere, they’re struggling to point at solutions, other than a crash. And they predict a sour future for stocks and bonds.
Debt Zombie Verizon
by Wolf Richter • • Comments Off on Debt Zombie Verizon
Verizon will unleash a tsunami of money on Wall Street. To pay for its $130 billion acquisition of Vodafone’s share of Verizon Wireless, it will print $60 billion of its own inflated stock. It will borrow the rest – much of it via the largest bond sale in history, though it’s drowning in debt. Now that sale is slamming the already deflating bond bubble.
Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype
by Wolf Richter • • Comments Off on Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype
The bond-fund massacre is spectacular. Antsy investors yanked $7.7 billion in August out of the world’s largest bond fund, Pimco’s Total Return Fund. In July, they’d yanked out $7.5 billion, in June $14.5 billion. From May 1 through August 31, the fund’s assets shriveled 14%. Other bond funds got hit too. And September is shaping up to be even worse.