This Debt Storm is Going to be Especially Disastrous

Before I go to sleep for the next 3 hours, I wanted to reach out to the world to let them know they’re doomed.

Loss rates are rising. Recovery for bond holders are averaging 29 cents on the dollar, down from 44 last year. Analysts believe that number can swoon down to 20 cents, leaving bond holders, inexorably, screwed.

Default rates are low, still under 5%, but rising. Remember, the vast majority of debt refinancing needs to be done between 2017-2020.

“We’ve had more corporate debt than ever, and more leverage than ever, which increases the potential for greater pain,” said Edwin Tai, a senior portfolio manager for distressed investments at Newfleet Asset Management.

Loss rates have already been rising. The potential for them to climb further may mean that in general junk bonds are not compensating investors enough for the risk they are taking, said Michael Contopoulos, high yield credit strategist at Bank of America Merrill Lynch. The average yield on a U.S. junk bond is now around 8.45 percent, according to Bank of America Merrill Lynch indexes, about the mean of the last 10 years.

“A lot of the troubled companies that had become overleveraged were able to find more temporary solutions in the last credit cycle,” Holtz said. “Those Band-Aids are no longer available now, and a lot of companies are going to have to face distress,” he said.

Junk-rated companies have debt equal to about 48 percent of their assets now, up 7.5 percentage points in the last 7 years, according to Bank of America Merrill Lynch data. The ratio of debt to assets is one of the main factors in how big losses will be when a borrower defaults.

Another factor is the rate of default, because when more companies are defaulting, more are looking to sell assets or otherwise restructure, leaving investors with lower recoveries. Default rates currently stand around 4 percent, according to Moody’s Investors Service. The ratings company forecasts that the measure will rise to 5.05 percent by the end of the year in the best-case scenario, and could jump as high as 14.9 percent under the most pessimistic projection.

While holding a portfolio of speculative-grade bonds to maturity at current yields may still result in a positive return for investors, higher defaults and losses on the securities will likely weigh on prices in the coming months, Bank of America’s Contopoulos said.

For many liquidated energy companies, “there’s not a whole lot to recover in terms of cash,” said Leonard Klingbaum, a partner at law firm Willkie Farr & Gallagher.

This story hinges on the price of oil. Back in 2009, oil shot higher and recovered with the general economy. The massive reflation of the markets helped distressed oil companies refinance their debt and survive. I should know, being long FTK from $1– which eventually traded above $20.

Sans a major reflation trade taking place, this default storm is more than likely to occur.

Some dork on Fox just rifled through all of the existing states left, overlaying polling data to make some back of the envelope projections.

The results were extremely dire for Donald Trump, who is only on pace to receive 1,193 delegates, which are many, many more than Rafael Cruz–but not enough to win the nomination.

Bottom line: Trump loses through victory. Cruz wins by coming in second. If you’ve got a business — you didn’t build that. Somebody else made that happen. And, also, if you like your plan and you like your doctor, you won’t have to do a thing. You keep your plan. You keep your doctor.

Russia is evil.

After tonight’s establishment new world order win in Wisconsin, Donald Trump went apeshit in a memo released to the media, decrying LYIN’ TED as a ‘trojan horse’ a puppet and totally controlled by party hacks in an attempt to steal the nomination.

Here is the full statement.

This is a significant step in The Donald’s ascendency to “Boss King” of America, totally and completely laying waste to the Grande Olde Party, who is hell bent on seeing him either destroyed against the rocks, broken or gone.

It’s looking more and more like a 3rd party might emerge from this fuckery that is to be the Republican Convention.

Captain of the Madison High School track team, Bernard Sanders, annihilated H. Clinton this evening, in spite of the Clinton sex machine roaring through the state like a former white hair’d President after ingesting an entire bottle of viagra.

No one really gives a shit that Bernie won. The superdelegates cast their lot before the primary even occurred–gifting the Clinton harem with at least 5 of the 10 ‘super dels’ as they like to call them. Bernie is okay with fighting the long, uphill, battle. Growing up as a young man, basically orphaned by the death of both parents, displeased with college due to it being ‘boring and irrelevant’, Sanders made it his life’s work to seek the destruction of the billionaire class of people in the corrupt capitalistic society filled with nothing but catiffs and mountebanks, the US of A.

Canada’s own, Rafael Edward Cruz aka “Felito”, won big in Wisconsin this evening, crushing the orange one Donald J. Trump. The loss was so extreme and belligerent, it bordered on a violent act being committed on the reviled and insane republican front runner.

Immediately after Cruz was projected the winner, MSNBC host, Chris Mathews, skewered Trump, declaring the people have spoken and if he’s unable to complete the task of getting 1,237 delegates he would have lost the game–likening it to a game of golf. He furthered the American people do not like Trump and will not give him anything, aside from millions of votes.

In a victory speech this evening, Rafael warned Hillary Clinton that he was coming for her, celebrating victory over Trump in the cheeseheaded state of Wisconson, sacking an astounding 24 delegates in the process.

Republican hack and troll-like human being, Newt Gingrich, said in a Hannity interview that the establishment is nuts if they think an outside candidate will grab the nomination in a brokered convention. The menace of a Paul Ryan or Mitt’d Romney selection has the social media circles atomic bombing one another. Newt put that fear to rest, insisting that the winner will be either Trump or Cruz, in spite of the indelible facts that Rafael cannot win the election without causing a great hazard to the personal health of The Donald. According to the laws of mathematics, even after this glorious triumph in the tundra of Wisconsin, Cruz needs to take 85% of all existing delegates, a feat only possible in the 5th dimension or another realm of the multiverse.

NOTE: Like Barack Obama dismays his muslim middle name Hussein, Rafael Cruz would like to strike the name Rafael from the public record, in favor of the more american sounding “Ted”, in an effort to appeal to an otherwise racist trailer truck driving under-educated white male.

The firebrands of this election cycle, B. Sanders and D. Trump, are both huge advocates for protecting American jobs through tariffs and never hesitate from throwing American companies, who actively seek slave wages abroad, under the proverbial bus.

GE, literally, gives zero fucks about America.

“That is greed and that’s selfishness. That is lack of respect for the people of this country,”

“General Electric was created in this country by American workers and American consumers,” Sanders said. “What we have seen over the many years is shutting down of many major plants in this country, sending jobs to low-wage countries.”

“If the only thing that matters to you is making an extra buck, you don’t care about my family. I think that’s immoral,” Sanders said. “And I think what corporate America has shown us in the last number of years, what Wall Street has shown us, the only thing that matters is their profits and their money. And the hell with the rest of the people of this country.”

According to Opensecrets.org, GE is quite active in political donations to both parties.

The Panama Papers are all the rage in the media. It speaks very poorly for Icelandic leaders, who told the UK to fuck off during the financial crisis and actually jailed dozens of bankers. It also makes Putin look bad, someone on Obama’sa naughty list. In its totality, McAfee believes America released these papers in order to hurt its enemies and use additional information as leverage over people of importance.

Here is the interview aired today with A. Jones.

CREE just humiliated themselves in the after hours, with an earnings miss that is bound to leave a significant sting. The competitive field of LED lighting, one that isn’t ingratiated with tax breaks most enjoyed by the solar crowd, is cannibalizing itself in a never-ending quest for commercial contracts.

The stock is down more than 15% in the after-hours.

Here is the companies statement, regarding this disaster.

“The estimated revenue is below the Company’s previously targeted range of $400 million to $430 million due to lower Lighting Products revenue,” stated Chuck Swoboda, Cree Chairman and CEO. “I believe we’ve addressed the root causes that led to our recent business challenges. While it’s premature to provide specific targets at this time, the order rate in commercial lighting improved in March, and we’re optimistic that this, combined with demand for new products, will begin to drive growth in fiscal Q4.”

• Lighting Products revenue is estimated to be approximately $187 million, lower than previously targeted due primarily to lower commercial orders driven by three main factors: customer service disruptions related to our ERP system conversion, new product delays and a slower than forecast calendar Q1.
• LED Products revenue is estimated to be in-line with the expectations for this segment in the Company’s previously announced revenue targets at approximately $151 million.
• Power and RF Products revenue is estimated to be in-line with the expectations for this segment in the Company’s previously announced revenue targets at approximately $29 million.
• GAAP and non-GAAP gross margins are estimated to be below the Company’s previously announced targets at approximately 29.7% and 30.5%, respectively. The difference between GAAP and non-GAAP gross margin is stock-based compensation expense.
• GAAP and non-GAAP operating expenses are estimated to be $5 million lower than previously targeted. The difference between non-GAAP and GAAP operating expenses is stock-based compensation expense, amortization of acquired intangibles and income from equipment sales associated with the LED business restructuring.
• The estimated earnings are below the Company’s previously targeted range of $0.04 to $0.11 per diluted share on a GAAP basis, and $0.22 to $0.29 per diluted share on a non-GAAP basis.
• During its third fiscal quarter the Company repurchased 0.6 million shares of its common stock under the Company’s stock repurchase program at an average price of $28.15 per share with an aggregate value of $17.8 million. After this repurchase, there is $350 million in aggregate purchase price value remaining in the Company’s stock repurchase program through June 26, 2016.

Come 2018, NYC will be blessed with heaven on earth. Starbucks is set to open its 2nd ‘roastery’ super store, the first being in Seattle. These stores are designed to hypnotize its customers into joining the coffee collective, for resistance is futile and the bean always wins.

“Our Seattle Roastery experience created something that had never been done before, transforming a retail environment into something far beyond just a coffee shop and into the single-best retail experience of any kind,” said CEO Howard Schultz in a statement.

These stores are like places of worship for coffee connoisseurs. All other NYC coffee retailers will soon be subjugated to the coal room class in the coffee hierarchy. H. Shultz and his billions will do for coffee what Walt Disney did for rollercoasters.

BEHOLD the Seattle roastery, coming soon to the major city near you.