Supercar-makers Lamborghini, Ferrari, and Rolls-Royce are reacting to the forces whacking global markets for luxury products: a corruption crackdown in China, Abenomics in Japan, and the Fed’s money-printing in the US. The idea that sales in China, which is printing billionaires by the dozens, are crashing is a hard-to-swallow concept for the industry.
Federal Reserve
Bubble Trouble: Record Junk Bond Issuance, A Barrage Of IPOs, “Out Of Whack” Valuations, And Grim Earnings Growth
by Wolf Richter • • Comments Off on Bubble Trouble: Record Junk Bond Issuance, A Barrage Of IPOs, “Out Of Whack” Valuations, And Grim Earnings Growth
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?
David Stockman: Monetary Central Planners And Financial Manias
by David Stockman • • Comments Off on David Stockman: Monetary Central Planners And Financial Manias
“One of the hallmarks of financial manias is that propositions which are perfectly absurd nevertheless get widely embraced by those caught up in the excitement,” writes David Stockman – in this case, Blackstone’s LBO of Extended Stay Hotels, and its subsequent sale at a ridiculous three times replacement cost, funded by Citibank … a pre-packaged scam.
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.
Wal-Mart Shoppers Clobbered By Fed Policies, Warren Buffett And His Ilk Thank The Fed
by Wolf Richter • • Comments Off on Wal-Mart Shoppers Clobbered By Fed Policies, Warren Buffett And His Ilk Thank The Fed
How much have Americans received of the nearly $3 trillion the Fed printed since the financial crisis? The recipients included JPMorgan, now negotiating to settle its various mortgage scams for $11 billion; it made $53.2 billion in profits over the last three years. American consumers weren’t so lucky. And Wal-Mart shoppers have been hit the hardest.
Was The Fed Scared Of This Graph?
by Wolf Richter • • Comments Off on Was The Fed Scared Of This Graph?
Just Replace The Whole Kit And Caboodle With Asset Bubbles
by Wolf Richter • • Comments Off on Just Replace The Whole Kit And Caboodle With Asset Bubbles
Fed digs in its heels, refuses to taper, though it could still start later this year, soon-to-be-ex Chairman Bernanke said. It would continue doing exactly what hasn’t worked for five years, in the hope that even more of the same might finally do the trick, rather than admitting, tail between its legs, that all QE has done is create asset bubbles.
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.
David Stockman: The Debt Zombies Kept On Coming
by David Stockman • • Comments Off on David Stockman: The Debt Zombies Kept On Coming
The founders of the LBO industry – KKR, Blackstone, Apollo, TPG, and Bain Capital – are stuck in giant deals that have turned into debt zombies. The outbreak of mega-LBO mania during 2006–2007 reflected a financial market deformation that sowed recklessness across the entire private equity space. And the debt zombies are still out there.