Friday, January 8, 2016

EZ Credit the Last 40 Years is Over. Next?

I like how the author puts scare quotes around money, an indication people are thinking more clearly.  But more to the point, junk bonds are big business means of finance roll-up operations, and the classic scorched-earth tactic that facilitated the "get big or get out" mantra of USA economic policy.
The most important outbreak or story of 2015 had to have been the junk bond reversal. It combined all the major elements of what investors and economic agents are both fearing and, at one point in the past anyway, hoping. It is the confluence of finance, “dollars”, liquidity and economics with or without recovery and the best scenario. The FOMC raising rates is supposed to confirm the brightest outlook, which would only lead to more extension in the credit cycle, and yet junk bonds traded as if the worst were only just around the corner. It isn’t so much the selloff, though that is obviously important, but rather how increasingly the selloff is being treated as permanent.
Walmart, Petco, O'Reilly, Walgreens, Old Navy, Office Depot, Union 76, Vons/Safeway/Dominicks, Lowes, Best Buy, Barnes & Noble, McDonald's and so on all used junk bonds at critical junctures.  But now with the massive numbers of store closings in the big box field, who wants junk bond finance?  Just what project would you want to finance?

More to the point, to use bonds is to lend your credit (not money, anymore), to reassign your tallies to unlikely-to-succeed projects.  Bondholders are supposed to have first place in liquidation, but when the auto-industry burned the bondholders in 09, that is not so sure anymore. In capitalism, the "rule of law" is entirely relative.  In any event, it would be good for people who once used junk bonds to be interviewed now as to why not anymore?  Specifics...

The upshot is the less business these people do, not dollar for dollar, but certainly in some positive relation, the more small business and specialty will do.  But never think online is a viable means to market or do business, that is proven unworkable.  Catalog and price list, sure. Self-service check-out, to be sure.  But not the basis of the business.  And on a story about store closures, there is this in Forbes:
But a fresh crop of online-only merchants are expected to make their mall debuts this year, building on a trend that gained momentum in 2014, as beauty subscription serviceBirchbox, for example, opened a store, while hot e-commerce eyewear shop Warby Parker opened more stores.
Just so.  With only 6% of sales taking place online, serious biz people are looking at the other 94%, brick and mortar operations.

I expect small regional trade shows to reinvigorate.

Feel free to forward this by email to three of your friends.


Anonymous said...

"Finance in today’s world has become war by non-military means. Its object is the same as that of military conquest: appropriation of land and basic infrastructure, and the rents that can be extracted as tribute. In today’s world this is taken mainly in the form of debt service and privatization. That is how neoliberalism works, subduing economies by indebting their governments and using unpayably high debts as a lever to pry away the public domain at distress prices. It is what today’s New Cold War is all about. Backed by the IMF and European Central Bank (ECB) as knee-breakers in what has become in effect a financial extension of NATO, the aim is for U.S. and allied investors to appropriate the plums that kleptocrats have taken from the public domain of Russia, Ukraine and other post-Soviet economies in these countries, as well as whatever assets remain."

Anonymous said...

"Contrary to popular belief, the conduct of nations on the international stage is almost never driven by moral considerations, but rather by a shadowy cocktail of money and geopolitics. As such, when you see the mouthpieces of the ruling class begin to demonize a foreign country, the first question in your mind should always be "what is actually at stake here?"

Anonymous said...

"America’s aristocracy is determined to take over Russia. Ever since the end of the Soviet Union and of its communism, the Cold War has become replaced by an increasingly hot war in which the US and its allies are expanding NATO right up to Russia’s borders, and imposing against Russia what the US refused to accept being imposed upon itself during the 1962 Cuban Missile Crisis: nuclear checkmate!"