The Debt Train Will Crash - Mauldin

“We no longer have business cycles, we have credit cycles.”

 Post-crisis growth, mild as it’s been, has been largely a function of debt, which central banks encouraged and enabled. 

The result was inflated asset prices without the kind of “recovery” seen in previous business cycles. 

Interest rates, i.e. the cost of debt, thus became critical.

I showed in that letter how companies will need to refinance about $4T of bonds in the next year, almost all of it at higher rates. 

This will hit debt-burdened companies that are already struggling and make it almost impossible for some to keep operating. 

Lenders, i.e. high-yield bond holders, will try to exit their positions all at once only to find a severe shortage of willing buyers.


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