A wave of corporate defaults was anticipated this year — but didn’t happen.
That doesn’t mean it won’t.
Financial strength has been declining for a while, a trend that was only briefly interrupted by the attempted cleanup in the wake of the Global Financial Crisis in 2008.
The “post-Volcker” era of low interest rates has seen companies grow more and more accustomed to taking risks with their financial health, and getting away with it
Andronoudis stresses that the Altman system may be outdated by now, as intangible assets make up a far greater share of balance sheets and generally do have value. But the idea that credit quality is degrading still stands.
“zombies” — companies that are no longer able to grow or even produce enough profits to cover interest expenses, but can survive because their interest costs are so low.
The effect of higher yields (and therefore lower bond prices) on banks’ investments. As Societe Generale SA demonstrates here, banks’ unrealized losses remain alarmingly high, while charge-offs on commercial real estate loans, which have grown significantly in the years since the GFC, have only just started to pick up
Arguably the single biggest factor helping to avert bankruptcies to date has been the success of corporate treasurers in negotiating long-term debt when they had the chance during the protracted low interest rates that followed the pandemic
Companies Are Going Broke Gradually, Not Suddenly
Gradually, then suddenly - John Hussman
“In the face of a breathtaking disconnect between Main Street and Wall Street, largely based on overconfidence in free money, my sense is that there remains a crisis ahead that will emerge ‘gradually, then suddenly,’” he wrote, referring to Ernest Hemingway’s famous quote from “The Sun Also Rises” about going bankrupt, “gradually, then suddenly.”
https://englundmacro.blogspot.com/2020/06/gradually-then-suddenly-john-hussman.html
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