$19 Trillion in Corporate Debt At Risk of Default

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watchnerd
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$19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 2:31 am

"In its most recent financial stability report, the International Monetary Fund raised the alarm about piles of risky corporate debt, which it said could amplify problems and deepen the next recession.

The group conducted a stress test based on a hypothetical economic shock that's half as severe as the 2008 global financial crisis. The results suggested that corporate debt worth $19 trillion from eight countries — China, the United States, Japan, the United Kingdom, France, Spain, Italy and Germany — is at risk of default in a future downturn of that magnitude because companies would struggle to generate enough cash to meet repayments. That would be 40% of all corporate debt."

https://www.cnn.com/2020/03/14/investin ... index.html
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FIREchief
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by FIREchief » Mon Mar 16, 2020 2:34 am

Gee, I guess we now know why total bond is tanking. Thank God for US Treasuries!! :beer
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by tombonneau » Mon Mar 16, 2020 2:50 am

Another informative piece on Bondaggedon:

https://www.ccn.com/corporate-debt-was- ... -the-fuse/
Morgan Stanley’s Ruchi Sharma estimates that one in six U.S. companies doesn’t have the cash flow to cover its own interest payments. Such firms have been relying on the debt market to continuously refinance.
I'm not an economist, but I don't think the above bodes well.

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watchnerd
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 2:55 am

tombonneau wrote:
Mon Mar 16, 2020 2:50 am
Another informative piece on Bondaggedon:

https://www.ccn.com/corporate-debt-was- ... -the-fuse/
Morgan Stanley’s Ruchi Sharma estimates that one in six U.S. companies doesn’t have the cash flow to cover its own interest payments. Such firms have been relying on the debt market to continuously refinance.
I'm not an economist, but I don't think the above bodes well.
I expect there will be another TARP, but this time it won't be mortgage-securities that are bought up.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by VeganBH » Mon Mar 16, 2020 6:00 am

watchnerd wrote:
Mon Mar 16, 2020 2:31 am
"In its most recent financial stability report, the International Monetary Fund raised the alarm about piles of risky corporate debt, which it said could amplify problems and deepen the next recession.

The group conducted a stress test based on a hypothetical economic shock that's half as severe as the 2008 global financial crisis. The results suggested that corporate debt worth $19 trillion from eight countries — China, the United States, Japan, the United Kingdom, France, Spain, Italy and Germany — is at risk of default in a future downturn of that magnitude because companies would struggle to generate enough cash to meet repayments. That would be 40% of all corporate debt."

https://www.cnn.com/2020/03/14/investin ... index.html
Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (moot at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
Last edited by VeganBH on Mon Mar 16, 2020 6:48 am, edited 1 time in total.
"Until we extend our circle of compassion to all living things, humanity will not find peace."​ ~ Albert Sc​hweitzer

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Noobvestor
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Noobvestor » Mon Mar 16, 2020 6:12 am

VeganBH wrote:
Mon Mar 16, 2020 6:00 am
watchnerd wrote:
Mon Mar 16, 2020 2:31 am
"In its most recent financial stability report, the International Monetary Fund raised the alarm about piles of risky corporate debt, which it said could amplify problems and deepen the next recession.

The group conducted a stress test based on a hypothetical economic shock that's half as severe as the 2008 global financial crisis. The results suggested that corporate debt worth $19 trillion from eight countries — China, the United States, Japan, the United Kingdom, France, Spain, Italy and Germany — is at risk of default in a future downturn of that magnitude because companies would struggle to generate enough cash to meet repayments. That would be 40% of all corporate debt."

https://www.cnn.com/2020/03/14/investin ... index.html
Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (mute at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
50x annual expenses? Why not buy a combination of annuities, TIPS and a small bit of equities/Treasuries for growth/diversification? Unless you're planning on living 50+ years you could pretty much stick to ultra-safe, inflation-tracking assets and be done with it, no? :shock:
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Chicken Little » Mon Mar 16, 2020 6:32 am

tombonneau wrote:
Mon Mar 16, 2020 2:50 am
Another informative piece on Bondaggedon:

https://www.ccn.com/corporate-debt-was- ... -the-fuse/
Morgan Stanley’s Ruchi Sharma estimates that one in six U.S. companies doesn’t have the cash flow to cover its own interest payments. Such firms have been relying on the debt market to continuously refinance.
I'm not an economist, but I don't think the above bodes well.
So why pay attention now? Not you, specifically, but anyone who chose not to pay attention before the virus.This all existed before the virus.

I said it countless times on here...you can't have a recession without a financial crisis anymore.

Maybe if we all paid attention, it would be different.

Now wait for the "defenders" to arrive, and try to pretend they understand "FED", and "TOOLs", and "Debt" any more than you do.

This is what happens when nobody is responsible for debt. Company wiped out? Doesn't matter. They take their salary, whether the storm, and start over. Sold bad debt? Same thing, all the governments problem. Unlimited government debt? Who cares...NOT MY PROBLEM.

MnD
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by MnD » Mon Mar 16, 2020 6:38 am

Many companies will declare bankruptcy - probably more than in during the aftermath of 08/09.
Households and financials are in much better shape debt-wise than the leadup to 08/09 but non-financial corporate are much more leveraged.
In retrospect we will find out many were zombie businesses and this will be the trigger to take them out.
Reorganization and liquidation will clean things up - people aren't going to stop buying clothes and bedding when JC Penney finally bites the dust.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by technovelist » Mon Mar 16, 2020 6:43 am

VeganBH wrote:
Mon Mar 16, 2020 6:00 am
watchnerd wrote:
Mon Mar 16, 2020 2:31 am
"In its most recent financial stability report, the International Monetary Fund raised the alarm about piles of risky corporate debt, which it said could amplify problems and deepen the next recession.

The group conducted a stress test based on a hypothetical economic shock that's half as severe as the 2008 global financial crisis. The results suggested that corporate debt worth $19 trillion from eight countries — China, the United States, Japan, the United Kingdom, France, Spain, Italy and Germany — is at risk of default in a future downturn of that magnitude because companies would struggle to generate enough cash to meet repayments. That would be 40% of all corporate debt."

https://www.cnn.com/2020/03/14/investin ... index.html
Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (mute at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
A Treasury-only MMF should be safe.
But just buying T-bills in your brokerage account is not that much more difficult and eliminates a middleman who theoretically could get in trouble.
What I do is keep all funds that aren't likely to be needed in the next month or so in T-bills in my Fidelity account.
I've just entered orders to move the rest of my cash into FDLXX, Fidelity's Treasury-only MMF, at the open today.
In theory, theory and practice are identical. In practice, they often differ.

joe-kr
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by joe-kr » Mon Mar 16, 2020 6:53 am

watchnerd wrote:
Mon Mar 16, 2020 2:31 am
Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (mute at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
After seeing last week’s action on BND, and reading about the amount of corporate paper it holds, I decided to move to treasury etfs. I sold just about all my BND, AGG, and IUSB. I moved to VGIT - vanguard intermediate treasury, SHV - short term treasury, and BIL - short term treasury.

If you look at a chart of BND vs VGIT for last week, VGIT held up nicely and we’ll see how they compare this week. The interest is lower on treasury but I want the safety on the bond side.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by VeganBH » Mon Mar 16, 2020 6:58 am

Noobvestor wrote:
Mon Mar 16, 2020 6:12 am
VeganBH wrote:
Mon Mar 16, 2020 6:00 am
watchnerd wrote:
Mon Mar 16, 2020 2:31 am
"In its most recent financial stability report, the International Monetary Fund raised the alarm about piles of risky corporate debt, which it said could amplify problems and deepen the next recession.

The group conducted a stress test based on a hypothetical economic shock that's half as severe as the 2008 global financial crisis. The results suggested that corporate debt worth $19 trillion from eight countries — China, the United States, Japan, the United Kingdom, France, Spain, Italy and Germany — is at risk of default in a future downturn of that magnitude because companies would struggle to generate enough cash to meet repayments. That would be 40% of all corporate debt."

https://www.cnn.com/2020/03/14/investin ... index.html
Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (mute at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
50x annual expenses? Why not buy a combination of annuities, TIPS and a small bit of equities/Treasuries for growth/diversification? Unless you're planning on living 50+ years you could pretty much stick to ultra-safe, inflation-tracking assets and be done with it, no? :shock:
Early 50's. Thought SPIAs were for much, much older. :annoyed We thought a very conservative 2-fund portfolio was just that - and simple, conservative and safe "enough". I hate being where we are now (total melt down), and having to rethink everything we thought we knew, and had planned out - and in the midst of it all, 2nd guessing EVERYTHING. :confused :confused Likely ship has sailed on options you suggest..... Thanks for response.
"Until we extend our circle of compassion to all living things, humanity will not find peace."​ ~ Albert Sc​hweitzer

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by VeganBH » Mon Mar 16, 2020 7:02 am

joe-kr wrote:
Mon Mar 16, 2020 6:53 am
watchnerd wrote:
Mon Mar 16, 2020 2:31 am
Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (mute at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
After seeing last week’s action on BND, and reading about the amount of corporate paper it holds, I decided to move to treasury etfs. I sold just about all my BND, AGG, and IUSB. I moved to VGIT - vanguard intermediate treasury, SHV - short term treasury, and BIL - short term treasury.

If you look at a chart of BND vs VGIT for last week, VGIT held up nicely and we’ll see how they compare this week. The interest is lower on treasury but I want the safety on the bond side.
Thanks for your response. At this point, we just want to have some confidence our VGMM (sweep) remains liquid - and VBTLX doesn't suffer losses similar to stocks - obviously, hasn't happened historically. Seems like this "time really is different." :annoyed :shock:
"Until we extend our circle of compassion to all living things, humanity will not find peace."​ ~ Albert Sc​hweitzer

joe-kr
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by joe-kr » Mon Mar 16, 2020 7:12 am

VeganBH wrote:
Mon Mar 16, 2020 7:02 am

Thanks for your response. At this point, we just want to have some confidence our VGMM (sweep) remains liquid - and VBTLX doesn't suffer losses similar to stocks - obviously, hasn't happened historically. Seems like this "time really is different." :annoyed :shock:
For Vanguard, my sweep account is the Federal Money Market Fund (VMFXX). You may want to make that change for a tiny bit more safety.
Also, reading on here clued me into Vanguard Treasury Money Market Fund (VUSXX)

I don’t think this one is a sweep option, and it has a 50k min, and pays a higher rate. It also holds more pure treasury’s than VMFXX. Check out the “portfolio” page when you lookup these money markets.
I put an order in this morning to move my VMFXX to VUSXX.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by tombonneau » Mon Mar 16, 2020 7:18 am

Chicken Little wrote:
Mon Mar 16, 2020 6:32 am
tombonneau wrote:
Mon Mar 16, 2020 2:50 am
Another informative piece on Bondaggedon:

https://www.ccn.com/corporate-debt-was- ... -the-fuse/
Morgan Stanley’s Ruchi Sharma estimates that one in six U.S. companies doesn’t have the cash flow to cover its own interest payments. Such firms have been relying on the debt market to continuously refinance.
I'm not an economist, but I don't think the above bodes well.
So why pay attention now? Not you, specifically, but anyone who chose not to pay attention before the virus.This all existed before the virus.

I said it countless times on here...you can't have a recession without a financial crisis anymore.

Maybe if we all paid attention, it would be different.

Now wait for the "defenders" to arrive, and try to pretend they understand "FED", and "TOOLs", and "Debt" any more than you do.

This is what happens when nobody is responsible for debt. Company wiped out? Doesn't matter. They take their salary, whether the storm, and start over. Sold bad debt? Same thing, all the governments problem. Unlimited government debt? Who cares...NOT MY PROBLEM.
I was paying attention before. :beer Like I said, I'm no genius, but corporate debt has just has been a bubble screaming to be popped.

Chicken Little
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Chicken Little » Mon Mar 16, 2020 7:23 am

tombonneau wrote:
Mon Mar 16, 2020 7:18 am
I was paying attention before. :beer Like I said, I'm no genius, but corporate debt has just has been a bubble screaming to be popped.
I promise I'm far less of a genius than you, and I passively collected all of this information.

An no lessons to be learned, by the way.

Even though this was always going to happen, it's now the virus' fault.

It was the internets fault. It was my mortgages fault. It was the virus fault.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by tombonneau » Mon Mar 16, 2020 7:36 am

Chicken Little wrote:
Mon Mar 16, 2020 7:23 am
tombonneau wrote:
Mon Mar 16, 2020 7:18 am
I was paying attention before. :beer Like I said, I'm no genius, but corporate debt has just has been a bubble screaming to be popped.
I promise I'm far less of a genius than you, and I passively collected all of this information.

An no lessons to be learned, by the way.

Even though this was always going to happen, it's now the virus' fault.

It was the internets fault. It was my mortgages fault. It was the virus fault.
We'll rinse & repeat in another 15 years, for sure. :sharebeer

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VeganBH
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by VeganBH » Mon Mar 16, 2020 7:39 am

joe-kr wrote:
Mon Mar 16, 2020 7:12 am
VeganBH wrote:
Mon Mar 16, 2020 7:02 am

Thanks for your response. At this point, we just want to have some confidence our VGMM (sweep) remains liquid - and VBTLX doesn't suffer losses similar to stocks - obviously, hasn't happened historically. Seems like this "time really is different." :annoyed :shock:
For Vanguard, my sweep account is the Federal Money Market Fund (VMFXX). You may want to make that change for a tiny bit more safety.
Also, reading on here clued me into Vanguard Treasury Money Market Fund (VUSXX)

I don’t think this one is a sweep option, and it has a 50k min, and pays a higher rate. It also holds more pure treasury’s than VMFXX. Check out the “portfolio” page when you lookup these money markets.
I put an order in this morning to move my VMFXX to VUSXX.
Thanks - yes that's our MM/Sweep as well (VMFXX) - added "safety" hopefully amounts to something. :? Will check out VUSXX - appreciate you input. :beer
"Until we extend our circle of compassion to all living things, humanity will not find peace."​ ~ Albert Sc​hweitzer

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Presintense » Mon Mar 16, 2020 7:49 am

watchnerd wrote:
Mon Mar 16, 2020 2:31 am
"In its most recent financial stability report, the International Monetary Fund raised the alarm about piles of risky corporate debt, which it said could amplify problems and deepen the next recession.

The group conducted a stress test based on a hypothetical economic shock that's half as severe as the 2008 global financial crisis. The results suggested that corporate debt worth $19 trillion from eight countries — China, the United States, Japan, the United Kingdom, France, Spain, Italy and Germany — is at risk of default in a future downturn of that magnitude because companies would struggle to generate enough cash to meet repayments. That would be 40% of all corporate debt."

https://www.cnn.com/2020/03/14/investin ... index.html
Yawn.
...you lost me at cnn.com
Performance = Potential - Distraction

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watchnerd
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 7:49 am

Chicken Little wrote:
Mon Mar 16, 2020 6:32 am


So why pay attention now? Not you, specifically, but anyone who chose not to pay attention before the virus.This all existed before the virus.
Well, I moved to all long Treasuries / short TIPS / MM a while ago for my fixed income a while ago because of concerns about corporate debt and its correlation with business risk.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

over45
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by over45 » Mon Mar 16, 2020 7:53 am

A relative of mine works at the highest level in Accounting for a major big box company. There is a good chance 50% of the people here have been in one of their stores. They are not getting paid by some customers and lines of credit have dramatically tightened, which in turn in creating cash flow issues for the company, which in turn is creating problems for their suppliers. Add that to supply chain issues because of the coronavirus. Their management saddled the company with sizeable leveraged debt and conditions are deteriorating rapidly. I'm sure they are only one of tens of thousands of companies in this position - but a big player.

bitdocmd
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by bitdocmd » Mon Mar 16, 2020 7:54 am

watchnerd wrote:
Mon Mar 16, 2020 7:49 am
Chicken Little wrote:
Mon Mar 16, 2020 6:32 am


So why pay attention now? Not you, specifically, but anyone who chose not to pay attention before the virus.This all existed before the virus.
Well, I moved to all long Treasuries / short TIPS / MM a while ago for my fixed income a while ago because of concerns about corporate debt and its correlation with business risk.
Changed investments based on your evaluation of external circumstances? Isn’t this market timing? :wink:

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by james22 » Mon Mar 16, 2020 7:55 am

Chicken Little wrote:
Mon Mar 16, 2020 6:32 am
tombonneau wrote:
Mon Mar 16, 2020 2:50 am
Another informative piece on Bondaggedon:

https://www.ccn.com/corporate-debt-was- ... -the-fuse/
Morgan Stanley’s Ruchi Sharma estimates that one in six U.S. companies doesn’t have the cash flow to cover its own interest payments. Such firms have been relying on the debt market to continuously refinance.
I'm not an economist, but I don't think the above bodes well.
So why pay attention now?
Some of us made OAK a position for just this reason.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 8:03 am

bitdocmd wrote:
Mon Mar 16, 2020 7:54 am


Changed investments based on your evaluation of external circumstances? Isn’t this market timing? :wink:
Hah.

But, no, because I did it without this info.

It was a general philosophical shift to take my risk on the equity side, much like Swensen, Bernstein, etc. have suggested since 2008.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

Triple digit golfer
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Triple digit golfer » Mon Mar 16, 2020 8:05 am

Well, I'm in Total Bond and I guess I'm sticking with it. I feel that making a change now is performance chasing and market timing.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 8:08 am

Chicken Little wrote:
Mon Mar 16, 2020 6:32 am

This is what happens when nobody is responsible for debt. Company wiped out? Doesn't matter. They take their salary, whether the storm, and start over. Sold bad debt? Same thing, all the governments problem. Unlimited government debt? Who cares...NOT MY PROBLEM.
Yes, moral hazard creates consequences.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 8:10 am

james22 wrote:
Mon Mar 16, 2020 7:55 am

Some of us made OAK a position for just this reason.
What is OAK?
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by spdoublebass » Mon Mar 16, 2020 8:20 am

VeganBH wrote:
Mon Mar 16, 2020 6:00 am

Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (moot at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
I don't give advice on this forum, but I'm just curious about your situation. You still seem to be well protected.

25% of your PF is in MM and 50% is in TBM (2.15% YTD as of FRiday) So 75% of your portfolio is protected. If you had 50x expenses and stocks went to zero you'd still have 37.5 years expenses.
SP500 is down 15.73% as of Friday. So your overall 25% in Stocks down is to about 21%. which still would be 10.5 years living expenses. So over you have 48 years expenses as of Friday.
I'm trying to think, but nothing happens

columbia
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by columbia » Mon Mar 16, 2020 8:40 am

The corporate bond market being a real threat to investors is not news.
If you leave your head in the sand for too long, you might get run over by a Jeep.

Novice2020
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Novice2020 » Mon Mar 16, 2020 8:43 am

joe-kr wrote:
Mon Mar 16, 2020 7:12 am
VeganBH wrote:
Mon Mar 16, 2020 7:02 am

Thanks for your response. At this point, we just want to have some confidence our VGMM (sweep) remains liquid - and VBTLX doesn't suffer losses similar to stocks - obviously, hasn't happened historically. Seems like this "time really is different." :annoyed :shock:
For Vanguard, my sweep account is the Federal Money Market Fund (VMFXX). You may want to make that change for a tiny bit more safety.
Also, reading on here clued me into Vanguard Treasury Money Market Fund (VUSXX)

I don’t think this one is a sweep option, and it has a 50k min, and pays a higher rate. It also holds more pure treasury’s than VMFXX. Check out the “portfolio” page when you lookup these money markets.
I put an order in this morning to move my VMFXX to VUSXX.
What are the Fidelity-equivalents of VMFXX and VUSXX? Fidelity default is SPAXX, which I assume is equivalent of VMFXX?

james22
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by james22 » Mon Mar 16, 2020 8:46 am

watchnerd wrote:
Mon Mar 16, 2020 8:10 am
james22 wrote:
Mon Mar 16, 2020 7:55 am

Some of us made OAK a position for just this reason.
What is OAK?
Oaktree Capital Group (OAK). Since acquired by Brookfield Asset Management (BAM).

Unlike other alternative asset managers, like private equity firms for instance, Oaktree’s focus on distressed investments make the business countercyclical. In bad times Oaktree puts its money to work to reap gains in the good times.

http://www.barrons.com/articles/howard- ... 1486642666

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by technovelist » Mon Mar 16, 2020 8:49 am

Novice2020 wrote:
Mon Mar 16, 2020 8:43 am
joe-kr wrote:
Mon Mar 16, 2020 7:12 am
VeganBH wrote:
Mon Mar 16, 2020 7:02 am

Thanks for your response. At this point, we just want to have some confidence our VGMM (sweep) remains liquid - and VBTLX doesn't suffer losses similar to stocks - obviously, hasn't happened historically. Seems like this "time really is different." :annoyed :shock:
For Vanguard, my sweep account is the Federal Money Market Fund (VMFXX). You may want to make that change for a tiny bit more safety.
Also, reading on here clued me into Vanguard Treasury Money Market Fund (VUSXX)

I don’t think this one is a sweep option, and it has a 50k min, and pays a higher rate. It also holds more pure treasury’s than VMFXX. Check out the “portfolio” page when you lookup these money markets.
I put an order in this morning to move my VMFXX to VUSXX.
What are the Fidelity-equivalents of VMFXX and VUSXX? Fidelity default is SPAXX, which I assume is equivalent of VMFXX?
Fidelity's FDLXX is Treasury-only.
In theory, theory and practice are identical. In practice, they often differ.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Corsair » Mon Mar 16, 2020 8:50 am

Weren't some these used for corporate buy backs, to increase share price?
All posts are my own opinions and are not financial advice.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 8:52 am

Corsair wrote:
Mon Mar 16, 2020 8:50 am
Weren't some these used for corporate buy backs, to increase share price?
Some were, yes. But not all of it. Some if it cash-flow related, some of it was capital raising / business expansion.

It's a melange.
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Sandtrap » Mon Mar 16, 2020 8:56 am

Vanguard Investment Grade Corporate Bond Index Fund.
Implications?

Should I worry?

j :happy
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by technovelist » Mon Mar 16, 2020 8:58 am

Sandtrap wrote:
Mon Mar 16, 2020 8:56 am
Vanguard Investment Grade Corporate Bond Index Fund.
Implications?

Should I worry?

j :happy
I wouldn't hold any bonds or other debt instruments that aren't Treasurys.
Maybe I'm being too careful, but I doubt it.
In theory, theory and practice are identical. In practice, they often differ.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 9:04 am

Sandtrap wrote:
Mon Mar 16, 2020 8:56 am
Vanguard Investment Grade Corporate Bond Index Fund.
Implications?

Should I worry?

j :happy

Personally, I don't hold corps. I do Treasuries and TIPS only for my fixed income.

One can question the wisdom in holding both ends of the business risk spectrum: owner/shareholder + lender/bondholder
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by tombonneau » Mon Mar 16, 2020 9:19 am

technovelist wrote:
Mon Mar 16, 2020 8:58 am
Sandtrap wrote:
Mon Mar 16, 2020 8:56 am
Vanguard Investment Grade Corporate Bond Index Fund.
Implications?

Should I worry?

j :happy
I wouldn't hold any bonds or other debt instruments that aren't Treasurys.
Maybe I'm being too careful, but I doubt it.
Ditto. Right now BND -1.5% and VGIT +1%.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by ClevrChico » Mon Mar 16, 2020 9:32 am

Triple digit golfer wrote:
Mon Mar 16, 2020 8:05 am
Well, I'm in Total Bond and I guess I'm sticking with it. I feel that making a change now is performance chasing and market timing.
Same. I expect losses, but I'll be staying the course, sticking with total bond, and following my IPS. I weathered the GFC, and I will weather this. Remember the daily financial doomsday news then?
Last edited by ClevrChico on Mon Mar 16, 2020 9:34 am, edited 1 time in total.

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Kenkat
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Kenkat » Mon Mar 16, 2020 9:33 am

$19 trillion of corporate debt has always been at risk of default. So has $15 trillion (or more) of US government debt. We are all just thinking about it now because there’s a crisis.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Anon9001 » Mon Mar 16, 2020 9:35 am

Assuming this thing gets defaulted on what do you think will happen? Contagion like 2008 but even worse?

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Kenkat » Mon Mar 16, 2020 9:35 am

ClevrChico wrote:
Mon Mar 16, 2020 9:32 am
Triple digit golfer wrote:
Mon Mar 16, 2020 8:05 am
Well, I'm in Total Bond and I guess I'm sticking with it. I feel that making a change now is performance chasing and market timing.
Same. I expect some losses, but I'll be staying the course, sticking with total bond, and following my IPS. I weathered the GFC, and I will weather this. Remember the daily financial doomsday news then?
Total Bond Index is 68% AAA rated securities, a lot of them being US government securities. I am sticking with it. I didn’t switch to a corporate bond index fund when times were good and I am not switching now when times are bad.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by ClevrChico » Mon Mar 16, 2020 9:38 am

Kenkat wrote:
Mon Mar 16, 2020 9:35 am
ClevrChico wrote:
Mon Mar 16, 2020 9:32 am
Triple digit golfer wrote:
Mon Mar 16, 2020 8:05 am
Well, I'm in Total Bond and I guess I'm sticking with it. I feel that making a change now is performance chasing and market timing.
Same. I expect some losses, but I'll be staying the course, sticking with total bond, and following my IPS. I weathered the GFC, and I will weather this. Remember the daily financial doomsday news then?
Total Bond Index is 68% AAA rated securities, a lot of them being US government securities. I am sticking with it. I didn’t switch to a corporate bond index fund when times were good and I am not switching now when times are bad.
Definitely! I've found myself reviewing the fund info page of Total Bond lately, and it still seems like a good choice. It also helps taking deep breaths. :-)

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by DB2 » Mon Mar 16, 2020 9:42 am

I've pointed this out before and debt levels everywhere are scary. A lot of states, municipalities, pensions, are going to be tested. The U.S. deficit is going to explode and finally start mattering.

Treasuries are all I would hold for bonds, but even long term treasuries sold off big last week and if we get serious inflation at some point from helicopter money coming and massive QE, debt monetization, etc. treasuries could be risky especially if the dollar starts tanking result of everything. I would definitely want to be on the short term end.

Re: federal debt: The fed is ultimately going to try and inflate this way in my opinion. They don't have any other choices.
I fear we may see stagflation come about.
Last edited by DB2 on Mon Mar 16, 2020 9:44 am, edited 1 time in total.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Triple digit golfer » Mon Mar 16, 2020 9:43 am

ClevrChico wrote:
Mon Mar 16, 2020 9:38 am
Kenkat wrote:
Mon Mar 16, 2020 9:35 am
ClevrChico wrote:
Mon Mar 16, 2020 9:32 am
Triple digit golfer wrote:
Mon Mar 16, 2020 8:05 am
Well, I'm in Total Bond and I guess I'm sticking with it. I feel that making a change now is performance chasing and market timing.
Same. I expect some losses, but I'll be staying the course, sticking with total bond, and following my IPS. I weathered the GFC, and I will weather this. Remember the daily financial doomsday news then?
Total Bond Index is 68% AAA rated securities, a lot of them being US government securities. I am sticking with it. I didn’t switch to a corporate bond index fund when times were good and I am not switching now when times are bad.
Definitely! I've found myself reviewing the fund info page of Total Bond lately, and it still seems like a good choice. It also helps taking deep breaths. :-)
Ditto!

So 68% AAA, 3.7% Aaa, 3.4% Aa, 11.4% A, and 18.2% Baa.

What exactly does that mean? Are the government ones the AAA and corporates are all the others? Baa is one step above junk, or to put it in a more favorable way, it's the lowest rated investment grade bond out there?

Randolph Mortimer
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Randolph Mortimer » Mon Mar 16, 2020 9:44 am

Maybe I'm misremembering but wasn't it fashionable just a little while ago to criticize Total Bond Market for not having enough corporates?

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by technovelist » Mon Mar 16, 2020 9:52 am

Triple digit golfer wrote:
Mon Mar 16, 2020 9:43 am
ClevrChico wrote:
Mon Mar 16, 2020 9:38 am
Kenkat wrote:
Mon Mar 16, 2020 9:35 am
ClevrChico wrote:
Mon Mar 16, 2020 9:32 am
Triple digit golfer wrote:
Mon Mar 16, 2020 8:05 am
Well, I'm in Total Bond and I guess I'm sticking with it. I feel that making a change now is performance chasing and market timing.
Same. I expect some losses, but I'll be staying the course, sticking with total bond, and following my IPS. I weathered the GFC, and I will weather this. Remember the daily financial doomsday news then?
Total Bond Index is 68% AAA rated securities, a lot of them being US government securities. I am sticking with it. I didn’t switch to a corporate bond index fund when times were good and I am not switching now when times are bad.
Definitely! I've found myself reviewing the fund info page of Total Bond lately, and it still seems like a good choice. It also helps taking deep breaths. :-)
Ditto!

So 68% AAA, 3.7% Aaa, 3.4% Aa, 11.4% A, and 18.2% Baa.

What exactly does that mean? Are the government ones the AAA and corporates are all the others? Baa is one step above junk, or to put it in a more favorable way, it's the lowest rated investment grade bond out there?
Apparently there are only two companies rated AAA: Microsoft and Johnson & Johnson.
As for the others, there are almost certainly going to be a lot of downgrades, especially among Baa companies.
When Baa bonds get downgraded, they won't be investment grade anymore. At that point, all institutions that must hold only investment grade bonds will have to sell.
You don't want to hold them when that happens.
In theory, theory and practice are identical. In practice, they often differ.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by Kenkat » Mon Mar 16, 2020 10:42 am

Randolph Mortimer wrote:
Mon Mar 16, 2020 9:44 am
Maybe I'm misremembering but wasn't it fashionable just a little while ago to criticize Total Bond Market for not having enough corporates?
Why, yes, as a matter of fact it was. It was right next to the 100% equities posts.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by watchnerd » Mon Mar 16, 2020 10:42 am

Kenkat wrote:
Mon Mar 16, 2020 10:42 am
Randolph Mortimer wrote:
Mon Mar 16, 2020 9:44 am
Maybe I'm misremembering but wasn't it fashionable just a little while ago to criticize Total Bond Market for not having enough corporates?
Why, yes, as a matter of fact it was. It was right next to the 100% equities posts.
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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by rkhusky » Mon Mar 16, 2020 11:02 am

Bond fund NAV changes don’t bother me. I am still collecting my dividends.

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Re: $19 Trillion in Corporate Debt At Risk of Default

Post by VeganBH » Mon Mar 16, 2020 11:27 am

spdoublebass wrote:
Mon Mar 16, 2020 8:20 am
VeganBH wrote:
Mon Mar 16, 2020 6:00 am

Best suggestion to protect ourselves? About 50% of our PF is Total bond (VBTLX); 25% is MM/Cash (25% is stock - which we've written off at this point)? Do we sell/move to MM or will that go kaput? Never thought this would be a worry - so quickly things have taken a turn.
We are on cusp of retirement (moot at this point?)....have (had) ~50x expenses. It feels like we SHOULD have a good portion under our mattress/safe. Is it too late to save ourselves from economic ruin? I really HOPE this comment (this thread) ages horribly (and everything just works out.....).

Any advice would be much appreciated. Thank you for all your informative posts.
I don't give advice on this forum, but I'm just curious about your situation. You still seem to be well protected.

25% of your PF is in MM and 50% is in TBM (2.15% YTD as of FRiday) So 75% of your portfolio is protected. If you had 50x expenses and stocks went to zero you'd still have 37.5 years expenses.
SP500 is down 15.73% as of Friday. So your overall 25% in Stocks down is to about 21%. which still would be 10.5 years living expenses. So over you have 48 years expenses as of Friday.
My situation is, well, I went from relatively relaxed about the whole situation (CV and meltdown) to absolutely loosing my you know what. Too much reading of worse case scenarios on this forum. :(
Your math is correct. Everything should be fine - even if this time IS different (fingers crossed for everyone).
"Until we extend our circle of compassion to all living things, humanity will not find peace."​ ~ Albert Sc​hweitzer

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