IMF warns Corporate Debt is $27Trillion timebomb

Key Sections of this AFR article: The Washington-based fund also warned that companies had responded to ultra-low interest rates and plentiful liquidity by taking on levels of debt that risked becoming a $US19 trillion ($27.7 trillion) timebomb in the event of another global recession. In it's half-yearly update on the state of global financial markets, the IMF said almost 40 per cent of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would be impossible to service from corporate cash flows if there was a downturn half as serious as that of a decade ago. "The search for yield in a prolonged low-interest-rate environment has le

Not a great time to own Australian banks

AFR article 17/10/2019 discussed the views of fund managers Platinum and Magellan. ' Even though risk-free rates have fallen, Mr Douglass was unwilling to rule out a scenario where US wage inflation increases to around 4 per cent and consumer price inflation increases to more than 2 per cent. That would force a rethink of the dynamic which has dominated shares in the era of ultra-easy monetary policy, and unleash a violent correction. "I'm not enamoured if I look out the next decade that banks are the right place to have your money yet 25 per cent of [Australia's] equity market is in banks," Mr Douglass said. "Very low interest rates aren't good for savers and it's not good for banks."

Emerging markets are comparative safe haven - Western economies are a basket case - Don Amstrad, Abe

This interview with Don Amstrad of Aberdeen is well worth watching. I think Ray Dalio's assessment of the outlook is more precise than Don's assessment, but there are some very useful observations in what Don has to say: Emerging markets are the comparative safe haven. They will be hit hard in the next financial crisis. But they will recover first and they will recover fastest because they have the ability to do so. The West are the basket case this time around. We are now at the end of the game, and the West will have to take the tough medicine. We are at the top of the roller coaster (in the West) looking down .. and it is go

Too much private debt caused the last 43 crises. In this interview, Richard Vague discusses his 200 year research into financial crises - investigating every one of the 43 major financial crises in 6 countries. Every one of them has been "caused" by too much private debt. And it is always private sector debt .... never government debt in developed countries. Key common symptoms across these 43 financial crises: Excessive private debt/GDP (in excess of a 150% threshold) PLUS Private debt/GDP growing more than 20% over a 5 year period. Australia gets a special mention. This combination is the key warning - the key finding of this research. This research has just be

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