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.
Federal Reserve
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.
Jobs Don’t Keep Up With Population Growth, But Unemployment Rate Drops Elegantly, Keeps Intact The Pretext For Fed “Taper”
by Wolf Richter • • Comments Off on Jobs Don’t Keep Up With Population Growth, But Unemployment Rate Drops Elegantly, Keeps Intact The Pretext For Fed “Taper”
When the Fed said it wanted to print more money in order to create jobs, it’s this graph that came to mind. And when it now says that it wants to taper that process because it already created enough jobs, it’s also this graph that comes to mind. Job creation and economic growth were just a pretext – a pretext that has been very crummy.
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.
David Stockman: How KKR Stripped The Beds In America’s Largest Hospital Chain With Some Help From Bubbles Ben
by David Stockman • • Comments Off on David Stockman: How KKR Stripped The Beds In America’s Largest Hospital Chain With Some Help From Bubbles Ben
“Bernanke’s maniacal money printing after the Lehman event catalyzed a virtual stampede back into the very same risk-asset classes which had been reduced to smoldering ruins,” David Stockman writes. It produced the craziest junk-bond binge of all times, allowing the mega-buyouts from before the crisis to survive and pay rich fees to the LBO lords.
Stocks: “Drastic Correlation Between Printing and Pumping” – And What It means When The Printing Ends
by Wolf Richter • • Comments Off on Stocks: “Drastic Correlation Between Printing and Pumping” – And What It means When The Printing Ends
David Stockman: How The Fed Helped Bushwhack TXU
by David Stockman • • Comments Off on David Stockman: How The Fed Helped Bushwhack TXU
A Very Profitable Part Of Banking Goes Totally To Heck
by Wolf Richter • • Comments Off on A Very Profitable Part Of Banking Goes Totally To Heck
Refinancing mortgages is phenomenally profitable for banks – one of the few growth sectors actually spawned by the Fed’s herculean efforts to force down long-term interest rates through waves of quantitative easing. Banks went on a hiring binge to shuffle all this paper around and extract fees. But now, with rising rates, that business is getting decimated.
When “QE Infinity” Turns Into A Pipedream: Hot Money Evaporates, Rout Follows – See Emerging Markets
by Wolf Richter • • Comments Off on When “QE Infinity” Turns Into A Pipedream: Hot Money Evaporates, Rout Follows – See Emerging Markets
Printing money and forcing interest rates to near zero, that’s how the Fed and other central banks papered over the Financial Crisis, duct-taped the bursting credit bubble back together, inflated new asset bubbles, and propped up TBTF banks. It accomplished a huge feat: a worldwide tsunami of hot money. Which is now receding.