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“Massively Compromised” – Corporate Debt Issuance Soars To Record Highs

"Massively Compromised" – Corporate Debt Issuance Soars To Record Highs

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"Massively Compromised" - Corporate Debt Issuance Soars To Record Highs Tyler Durden Tue, 08/18/2020 - 08:50

Authored by Bill Blain via MorningPorridge.com,

“Is it possible a cur can lend three thousand ducats?”

Yesterday the US Primary Investment Grade Bond market touched a record $1.346 trillion issuance this year, surpassing the total for 2017, still with the three busiest months in the new issue market to come. The global volume of new corporate debt in the first half of 2020 exceeded $2.5 trillion. It’s a great year to be a new issue debt banker… 

The market volumes have been extraordinary. The rise in US issuance is in no small part due to the Fed’s unlimited liquidity via its investment grade QE programme. The Fed has barely had to buy any debt – the mere promise to do so has been enough. The ECB’s corporate QE Infinity programme has been equally stimulative.

Right across the investment banking multiverse, new issue desks are preparing themselves for an absolute torrent of new corporate debt to hit the markets when the new issue funding season reopens in September. Actually, it hardly closed for a break in August – the demand for high-grade paper to meet cash inflows into bond funds hasn’t abated!

Who would not want to own corporate debt? Central banks have promised to buy anything investment grade. There is no liquidity threat. Back in 2008, bond markets locked tight as it become impossible to sell paper. Bids evaporated in an offered only market. No problem this time – just call the Fed. 

But.. what about returns? 

Well its now an ultra-safe market.. so why worry about returns? (Yes.. you should worry about zero bond returns…) As demand for corporate debt has soared, so have prices, causing the average yield – the Bloomberg Barclays US Aggregate Corporate Index - to drop to 1.82% earlier this month. A record low yield. If you bought the index in March, you’ve made a very healthy return from when it stood at a distressed 4.5%. 

Supply has been fuelled by corporates scrabbling to finance themselves through a Pandemic lockdown of unknown duration. There has been a stampede towards the new issue funding desks. When I was a Debt Capital Markets banker we always told our clients: don’t fund when you have to.. fund when you can. This is a time when they can.. So they have, and they are still funding. 

Rising leverage is another consequence of QE Infinity. The Fed’s promise to provide liquidity means any investment grade corporate can access as much cash as it wants, and is free to spend it as it sees fit. Are the ratings agencies worried? Don’t know, and they don’t particularly seem to care.. but I ain’t reading many headlines about their rising concerns on debt levels. (What I did spot was these oh so clever rating agencies agreeing the EU borrowing €750 trillion to finance Virus recovery is not apparently a worry… Yeah.. Right?)

But, but and but again… Who wants to own corporate debt at sub 2%? 

If you think it’s going to tighten further – then perhaps, but 2% is not a real risk return. Any Risk vs Return calculation has been massively compromised by the absolute low risk-free rate – Treasury bonds. If government bonds yield close to nothing, then it makes anything positive relatively attractive – but still a negative real yield or close to it. If you really think a 100 basis point risk premium is a fair payment for taking corporate risk on a name one step away from junk in the face of this looming recession… then I have some bonds you really should buy. 

Ultra-low interest rates (ZIRP and NIRP) plus unlimited FED liquidity have fuelled the bond binge. Corporates are loving it – Apple recently issued a $8 bln “general corporate purposes” bond we all know will go to funding stock buybacks. I hope Tim Cook thanks the Fed. Apple is getting that money for practically nothing – the 40 year tranche paid 2.5%. (And I will refrain from idle speculation on whether we will still be buying Bright Shiny Things from Apple in 2060.) 

Over the past 10 years, US corporates have spent around $9.2 trillion buying back their stock – money that wasn’t spent on building new factories, infrastructure, products or creating jobs… but boosting the bonuses of executives and dividends to owners… 

My recollection is that $9.2 trillion pretty much equates to 80% of what they’ve borrowed over the past 10-years (sorry, but I don’t have access to a Bloomberg at home to actually dig out the numbers), which means the last 10-years of artificially low Interest Rates has not created a debt-driven boom in corporate investment, product innovation and expansion, but has basically all gone into the pockets of insiders and owners. 

(I should not complain. Apple is my largest PA stock position. But it doesn’t feel right.)

In April Boeing was able to tap the US investment grade market for $25 bln. That enabled it to avoid the embarrassment of going cap in hand to the US government for a bailout. It should see it through to the end of this year of slowed deliveries and making over 10% of its workforce redundant. Over the past 10 years Boeing has been textbook everything that’s rotten with Corporate America – if failed to develop new models, it compromised safety on its 737 Max (killing 346 passengers and crew) instead, and spent most of its profits and new debt on stock buybacks – leaving the company a fractured mess. It will survive – but only because of its criticality to the US economy (1% of GDP in good years) and it’s a massive defence contractor.

And how much of the corporate debt raised in investment grade and junk markets (which similarly benefit from Central Banking largesse via ETF purchases), is going to be Zombie companies with little chance of repaying that debt should condition deteriorate or interest rates rise? (Ie in both good and bad economic scenarios, most Zombies will… “perish”… ahem..)

Basically, the booming new issue bond market is sustained entirely on ZIRP, QE Infinity and the need for Debt Capital Markets Bankers to earn their bonuses by persuading corporates that open markets today means its time to “fill their boots” issuing new debt. The door is open today.. Tomorrow? Maybe not… 

(Or… if you are prepared to free yourself from the shackles of Central Bank liquidity – we have 4-5% yield secured assets, and double digit project finance deals to finance. Real Assets with real yields..)

Finally, might I refer you to my latest Lite-Bite video commentary I’ve done for Shard Capital.

This week I look at the strength of markets in the face of looming Pandemic recession, and propose a dual investment strategy of arbitraging the Central Banks, while building a “risk-off” investment bunker from Gold and Govt Bonds.

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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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