What explains the surge in U.S. national debt ........

[whiskynovember]

What explains the surge in U.S. national debt during President Trump’s time in office?

https://www.msn.com/en-us/money/markets/what-explains-the-surge-in-u-s-national-debt-during-president-trump-s-time-in-office/ar-AA16Ekx1?cvid=f91650d5cf6b499c90f41413f9a2a5ca#comments

Aside from the boring Snopes report, the first comment rocks it:

"I will deliver a balanced budget in the 2nd year of my first term and eliminate the federal deficit very early in my second term. " Trump had to contract co-vid to actually acknowledge its existence. HIS negligence is why he had to spend an additional $ 3.7 trillion to save his massive debt laden juiced economy and the data bears it out. Republican motto : A pound of prevention is worth an ounce of cure. HE politicized it in the name of " states rights ". I've yet to see a disease which honors state borders or legislation.

Annnnnnnnnnnnnnnnnnnnnnnnnnnnnd CUT!

[lowkey]

Have you seen the rates on credit default swaps? I’m a little freaked out

[whiskynovember]

Have you seen the rates on credit default swaps? I’m a little freaked out

Got a link? (I'm on the road and distracted by a family matter.) Is this sovereign or corporate debt? Thanks.

[whiskynovember]

Credit risk rises with rising interest rates if debt has to be rolled over, and there's way more debt inn the system than in 2008. Some sovereigns have debt as risky as Zombie companies in that both rely on flat or falling interest rates in order to make their balance sheet work, so credit risk is rising everywhere. With sovereigns the release valve for that risk is either in the currency or the bond market yield. With corporations the release valve on their debt shows up in repo or CDS rates.

There is a day of reckoning coming for having too much debt, but it should be reckoned in real terms and not in nominal terms. Monetary inflation fixes the math by punishing the rich elite bond holders in real terms: they get paid back 100% but in dollars that are worth less than before. The nominal fix is what the GOP is threatening, a solution that sets everything on fire: the bond market; the currency market; the economy; the equity market. It would lead to massive unemployment, a depression, and enormous bailouts in the end.

A recession could cure a substantial portion of the risk, and money curves all over the globe are saying that's what we'll see.

[lowkey]

Zombie stocks, huh. That was a pretty big topic last year for me and mine. I’m relieved to know that you see that too. Are a ton of zombies you’re referring to brick and mortar by chance?

[whiskynovember]

Zombie stocks, huh. That was a pretty big topic last year for me and mine. I’m relieved to know that you see that too. Are a ton of zombies you’re referring to brick and mortar by chance?

Don't actually know. I would have thought there were a lot in tech, but this rando site appears to show a spread across sectors:

https://finbox.com/ideas/zombie-companies-list

[lowkey]

Ok, tech makes sense too. Brick and mortar caught my eye initially, but tech and pharma make sense too. The zombies, do they mostly all have a small cap? At least the ones on your radar?

[lowkey]

Ok. I realize immediately how dumb that small cap question is. Lol. Obviously they do now. But you know what I mean

[whiskynovember]

I don't follow them individually. I see them as an indicator of malinvestment left over from zero interest rate policy (zirp) days. Within the class as a whole, some will manage to re-capitalize but they'll either take a hit to margins or have to reduce their workforce. If they manage to make the adjustment and then we go into recession they'll either be taken over or just go tits up adding to the rise in unemployment. The interesting play will be their debt. If the FED has to make a heavy pivot there might be a period of time within which the bonds of the Zombies are deeply discounted and paying a very high coupon rate (established during the previous re-capitalization period). Their junk bonds can be called (retired at par) or the company can become turn around plays, making for an interesting arbitrage moment. It's stuff way above my paygrade, and the bonds usually sell priced in 6 figure lots. Heady stuff.