Juggling Dynamite

David Rosenberg, president of Rosenberg Research, explains why he thinks there’s still elevated risks of recession heading into 2020.  Here is a direct video link.

Over the past 21 months, selling in ‘junk’ grade CCC corporate bonds has pushed their prices down and average yield up from 7.7% in February 2018 to 11.31% by November 2019—a massive 46% increase in borrowing costs for highly indebted companies. Over the same period, the yields on BB bonds rose 11% and BBBs an even greater 18% (from 1.16 to 1.43%), as solvency comes under greater scrutiny.

Newell Brands (Elmer’s Glue and Rubber Maid), Ford, Amazon, 3M, Walmart, GM, GE and Kraft are just a few of the widely held S&P 500 companies teetering on the brink of a debt downgrade in 2020. The trifecta of high debt, rising borrowing costs and slowing sales will continue to focus management on layoffs and other cost-cutting efforts.

Recently, credit-rating agencies (paid by the issuers they are rating) belatedly started warning that “weakest link” S&P 500 companies (with a credit rating below BB with a negative outlook) “jumped to 263 in September, from 243 in August, marking the highest level since November 2009…”.  We cover these issues in our December 31 client letter.  Economist David Rosenberg explains further in the clip below.

David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, discusses corporate credit risks with Bloomberg’s Amanda Lang and Shery Ahn on “Bloomberg Markets.”  Here is a direct video link.

This book is hard-hitting and unsettling with thought-provoking observations on the social and economic challenges afoot as we move into the ’20s.

Technology, wealth concentration, social upheaval, the decline of intellectual rigour, ‘thought leaders’ and receding respect for the status quo, all worth a mull.  We do not have to agree with all the ideas here, but if we only consume ideas that make us comfortable, we do ourselves a great disservice.  Substantive change is messy, best to try and understand from whence it is coming.

See  Winners Take All:  The Elite Charade of Changing the World.  Author Anand Girdharadas appeared with Steve Paikin on The Agenda in December.

Are billionaires such as Jeff Bezos and Bill Gates the American Dream personified? Do they reflect a healthy economy? Or, as Senator Bernie Sanders has said, should billionaires not exist in the first place? Anand Giridharadas, Time magazine editor-at-large and author of “Winners Take All: The Elite Charade of Changing the World,” discusses why he agrees with Sanders. As well, he gives his take on the Democratic hopefuls and whether or not any one of them can beat Donald Trump.  Here is a direct video link to the discussion.