Juggling Dynamite

Ho hum…its that part of the cycle where people have lost their minds again. See: Junk loans top ’08 record as safeguards stripped

The amount of loans to the riskiest U.S. companies ballooned to a record this year, propelled by unprecedented demand for floating-rate debt that offers protection from rising interest rates.

The market for junk-rated loans increased to $683 billion, exceeding the 2008 peak of $596 billion, according to Standard & Poor’s Capital IQ Leveraged Commentary and Data. The $130 billion surge this year was fueled by borrowings that don’t include typical lender protections such as limits on leverage.

Loans, which suffered the biggest losses in the fixed-income market during the financial crisis, staged a comeback as investors funneled a record $64.4 billion into funds that buy the debt in anticipation the Federal Reserve would start unwinding its bond buying that’s suppressed borrowing costs. The demand has enabled companies to take on more debt for shareholder rewards, prompting regulators to warn that the excesses which contributed to the credit crisis may be creeping back.

Billionaire investor Jim Chanos, who famously shorted Enron before the company collapsed, told CNBC on Thursday that now is one of the best times in recent memory to get short.

“I think the risks have increased in the U.S. market rather dramatically in the past year,” Chanos told “Closing Bell.” “Are we at some sort of top? I have no idea, but I do know that people that were eschewing risk in 2009 when they should have been taking it are now embracing it in late 2013.” Here is a direct video link.

He also spoke about the banking crisis resurfacing in China this week and downside that presents to other markets. Here is a direct video link.

CNBC’s 2007 profile of Jordan Belfort, the real Wolf of Wall Street, who’s being portrayed by Leonardo DiCaprio in the movie of the same name. Here is a direct video link.

Unfortunately the tactics, behaviors, damage and waste in this story are fairly common. The finance culture is arguably worse today than it was in the late 90’s: years of staggering unjust enrichment, financial bailouts and few prosecutions have emboldened the actors. See: We saw “Wolf of Wall Street” with a bunch of Wall Street Dudes and it was disturbing.