Analysis

Gundlach: Debt-Financed Share Buybacks Turned Stock Market Into High-Risk CDO

Jeffrey Gundlach, CEO of DoubleLine Capital LP, has some interesting thoughts on debt, stock buybacks, and leverage.

Please consider Gundlach's Slideshow on Debt Financed Buybacks.

Corporate Credit as Percentage of GDP

Investment Grade Has Shorter Maturity Than High Yield

US Corporate BBB Debt

BBB debt is one step above junk.

Rise of the Zombie

In the US, 15% of the companies in the S&P 500 are Zombie Corporations.

Zombie firms are those that are unable to cover debt servicing costs from current profits over an extended period.

If they cannot refinance, they go under.

Junk Rated Bonds

On December 28, I noted Suddenly There's No Appetite for Bond Deals as Spreads Widen.

Never before have there been so many bonds this close to junk.

Bond Market Breakdown (August 2018)

  1. AAA $0.11 Trillion
  2. AA $0.59 Trillion
  3. A $2.60 Trillion
  4. BBB $3.15 Trillion
  5. BB $0.57 Trillion
  6. B $0.52 Trillion
  7. C $0.16 Trillion

Fed on Hold

The Powell Fed is now on hold. It cannot possibly matter one bit. It's simply Too Late to Matter.

 

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