Tag Archives: Bankruptcy

The Ugly Truth About Printing Press Money, by MN Gordon

Posted on April 17, 2021 | 1 comment

The monthly budget deficit in March of this year was $660 billion, which was the annual budget deficit in 2017. It takes a PhD in economics to believe a government can perpetually borrow and never go broke. From MN Gordon at economicprism.com:

Weeping and gnashing of teeth shall come…

We don’t know when, exactly.  But we do know a certain catastrophe’s approaching.  In fact, we can see it on the horizon.

Does anyone in Washington give a rip the nation’s beyond broke?  Does anyone in Congress care that outright money printing is what’s financing their stimulus bills?  Does House Financial Services Committee Chair Maxine Waters think it’s all a real hoot?

Surely, someone in the legislature is aghast at federal spending that’s gone completely out of control.

Are you aghast?

We are.  But there’s nothing we can do to stop it.  Nearly all remnants of fiscal conservatism have been quarantined from federal government.

The majority of the electorate have voted for generous gifts from the public treasury.  They want free education, free food, free phones, free transportation, and free drugs.  They want debt forgiveness.  Most of all, they want free money.

Many representatives are pushing the President to give the voters what they want…and what the politicians have promised.  Specifically, more stimmy checks.  According to MoneyWise:

“More than 75 members of Congress say that until the pandemic is over, there should be regular stimulus checks.  President Joe Biden is being urged to wrap them into the $2.3 trillion infrastructure spending plan he’s now promoting.”

Stimmy checks, as far as we can tell, have nothing to do with infrastructure.  Yet that’s the beauty of perpetual stimmy checks in the interminable pandemic era.  The legislature can “wrap them into” just about anything.  All it takes is a simple stimmy check earmark.

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Are You Easy Prey? by Jeff Thomas

Posted on March 1, 2021 | Leave a comment

Broke governments, particularly the broke American government, are growing increasingly rapacious. Unfortunately, the only way to protect yourself may be to leave the country. From Jeff Thomas at internationalman.com:

easy prey

For many years, I’ve been predicting the coming of a crisis of epic proportions. I’ve focused on the economic and political aspects, although the social aspects will be no less severe.

This is not the stuff of crystal balls, nor is it mere guesswork. The fundamentals for economic crisis have remained essentially the same for thousands of years, and if we’re diligent enough to study history and analyse the present, we can identify the fundamental ingredients of a crisis in the making. Once we’ve done this, the actual prediction of the event itself is no more inspired than recognising that if we have a bomb filled with explosives and we light the fuse, it will go off.

The predicted bomb was long in coming, but in 2020, it arrived on our doorstep and the fuse is lit.

Governments understand that, if they wish to give the shaft to their own citizens and still remain in power, they must deflect blame for their actions to another party.

In 2020, they outdid themselves by creating perhaps the most ingenious distraction ever created. Whether or not the coronavirus was consciously created and/or consciously released, governments’ handling of it has been brilliant.

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Another Nail In The Coffin Of Big Cities, by John Rubino

Posted on January 10, 2021 | Leave a comment

Many of America’s cities are toast. From John Rubino at dollarcollapse.com:

The riots, political turmoil, and other banana republic embarrassments seem to be ending – for now. So let’s get back to examining the real problems of this hyper-leveraged, dangerously-complex world. Like how big cities might soon be obsolete:

Pretend it’s 2019 and you’re living in a major US city. You, your spouse and two kids have a fairly nice (though admittedly very expensive) apartment in a relatively safe neighborhood, and life is pretty good. There’s a park nearby, dozens of great restaurants within walking distance, and plenty of interesting friends. And of course your high-paying jobs are right there.

Then comes 2020. A pandemic causes your mayor to panic and lock down the city. There go the park, friends, and restaurants. And before the horror of this new normal has a chance to sink in, civil unrest explodes and turns your once-iconic neighborhood into a Mad Maxian war zone of burned-out cars and boarded up storefronts.

If it was just you, you might stick it out. But with a family, this life is now untenable. So you look into moving, preferably to somewhere semi-rural where neither a lockdown nor riots will ever be a problem and the kids can actually play outside. Maybe it’s time to indulge your fantasy of working remotely from a homestead in a gorgeous place.

But you immediately hit a technological speed bump: Broadband Internet, which up to this point had seemed both ubiquitous and a basic human right, isn’t available on the homesteads you now covet. The only option out there is low-tech, unreliable, molasses-slow satellite Internet that, if the reviews are to be believed, is worse than nothing at all.

You realize that if you want to keep doing your work at a high level, you’ll have to stay urban, or at best suburban, with all the health and safety risks that that now implies. Big cities and their burbs, it seems, will live on for a while as necessary places for sophisticated professionals to do their thing.

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“People Are Fed Up”: California Out Of Excuses As Coronavirus Defies Militant Lockdowns, by Tyler Durden

Posted on December 29, 2020 | Leave a comment

People might not be quite as angry if all the lockdowns and masking had done any good, but they haven’t. The hypocrisy hasn’t helped, either. From Tyler Durden at zerohedge.com:

California’s response to COVID-19 ranks slightly below China welding people inside apartment buildings in terms of militancy, yet the for all the measures taken by the Golden State, it’s become one of the nation’s worst epicenters for the pandemic, according to Politico.

Registered Nurse Allison Shiftar puts on protective glasses as she gets ready to go into one of the triage rooms to care for a Covid-19 positive patient in the emergency department at Sutter Roseville Medical Center in Roseville, Calif. | Renee C. Byer/The Sacramento Bee via AP, Pool)

And if Politico is calling out California, whose Democratic governor deems himself above his own rules, you know it’s bad.

America’s most populous state has become one of the nation’s worst epicenters for the disease, setting new records for cases, hospitalizations and deaths almost every day. Things are so bad in Southern California that some patients are being treated in hospital tents, while doctors have begun discussing whether they need to ration care.

The turnabout has confounded leaders and health experts. They can point to any number of reasons that contributed to California’s surge over the past several weeks. But it is hard to pinpoint one single factor — and equally hard to find a silver bullet. –Politico

The state of nearly 40 million residents has seen almost 2 million cases and 22,000 deaths despite strict mask mandates, school and playground closures, and restrictions on dining that are destroying small businesses across the state.

“Nationally, there has been a kaleidoscopic application of every imaginable type of lockdown order with California being the most restrictive and inflicting the most devastation on small businesses and the most economically vulnerable service workers. And still, we are none the better as far as COVID is concerned,” said California Restaurant Association President and CEO Jot Condie, adding “In fact in L.A. where indoor and outdoor dining are completely shut down, with indoor dining [closed] since July, the virus rages on.”

Meanwhile, the state – like many others, is suffering from spikes in crime, mental illness and suicide.

At more than 100 new daily cases per 100,000 residents, California’s case rate is second only to that in Tennessee, according to the nonprofit tracking site Covid Act Now — though it’s a state that does not mandate mask wearing and allows indoor gatherings of up to 10 people. The website Covid Exit Strategy shows a 97 percent rise in Covid throughout California, which has gone in the opposite direction from its West Coast counterparts, Oregon and Washington. -Politico

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The Viral Assault On Small Businesses, from MN Gordon

Posted on December 13, 2020 | Leave a comment

Covid-19 measures have absolutely screwed small businesses, to the delight of large businesses. From MN Gordon at economicprism.com:

This year, fear of a deadly pandemic triggered the ruling class to spread authoritarian lockdown orders.  The god of science, like a burning bush, told them to remove their sandals and deliver policies of regression.  A paranoid public was quick to comply.

Humans have been battling viruses since well before the wheel was invented.  According to archaeologists, a fast moving epidemic roughly 5,000 years ago wiped out a prehistoric village in what is today northeastern China.  Dead bodies were stuffed inside a dwelling – the Hamin Mangha – that was later burned down.

Another mass burial, the Miaozigou site, took place about the same time and in the same general area.  Together these discoveries suggest there was a rapid outbreak of an acute infectious disease.  An epidemic ravaged the entire region.

The viral spread of submicroscopic pathogens has the potential to alter the flow of history.  Soldiers returning to the Roman Empire after war against Parthia in 165 AD brought back more than the spoils of conquest.  The Antonine Plague, which is suspected to have been smallpox or measles, claimed an estimated 5 million lives.  The epidemic had devastating consequences throughout the Roman Empire; perhaps bringing forward the demise of Pax Romana.

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First CMBS Mega-Casualty On Deck: $700MM Starwood Portfolio On Verge Of Default, by Tyler Durden

Posted on September 19, 2020 | Leave a comment

A CMBS is a commercial mortgage backed security, a package of commercial mortgages. A big one will soon default, which is how credit crises get started. If this one doesn’t kick the crisis into high gear, another will, and soon. From Tyler Durden at zerohedge.com:

Over the past 6 months we have repeatedly discussed the plight of commercial real estate which unlike most other financial assets, failed to benefit from a Fed bailout or backstop (but that may soon change). It culminated in June when we wrote that the “Unprecedented Surge In New CMBS Delinquencies Heralds Commercial Real Estate Disaster.” The ongoing crisis in structured debt backed by commercial real estate in general and hotel properties in particular, prompted Wall Street to launch the “Big Short 3.0“ trade: betting against hotel-backed loans, which had the broadest representation in the CMBX 9 index, whose fulcrum BBB- series has continued to slide even as the broader market rebounded.

Yet while prominent failures within the CMBS universe had so far been rare due to overcollateralization of even highly distressed portfolios, as the economic slump drags on, as various stimulus measures expire and as landlords fail to make rent payment, the various embedded liquidity buffers have been rapidly draining and as a result we are now approaching the moment where one or more prominent names are about to suffer a spectacular blow up.

The first among them will almost certainly be the Starwood Retail Property Trust 2014-STAR, a portfolio which is backed by an almost $700 million defaulted loan which is collateralized by several malls – including The Mall at Wellington Green in Florida – owned by Barry Sternlich’s Starwood Capital, and whose investors are starting to take losses according to Bloomberg, after the Covid-19 pandemic shuttered stores, crippled rental payments and wiped out emergency cash reserves that had been keeping interest payments flowing.

A big reason for the devastation is that The Mall at Wellington Green, the core property of the portfolio and Wellington’s biggest taxpayer, saw its taxable value drop 32% in 2019 to $150 million as a result of the Nordstrom departure, according to the Palm Beach County Property Appraiser’s Office. Starwood Retail Partners bought the property in 2014 for $341.1 million, marking the largest real estate deal ever recorded in the county at the time. It is now worth less than half, and that’s before most of its other anchor clients also fled or filed for bankruptcy.

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The Zombie Companies Are Coming, by Wolf Richter

Posted on August 28, 2020 | Leave a comment

Endless money for deeply indebted companies that have no prospect of making a profit is not a feature of capitalism. From Wolf Richter at wolfstreet.com:

By Wolf Richter. This is the transcript of my podcast last Sunday, THE WOLF STREET REPORT. You can listen to it on YouTube, and you can find it on Apple Podcasts, Spotify, Stitcher, Google Podcasts,  iHeart Radio, and others.

Through the first half of August – which is normally a quiet period for the bond market in the US – a total of $56 billion in junk bonds and leveraged loans were issued by junk-rated companies, according to S&P Global. That was nearly 50% higher than the prior records for the same period in 2012 and 2016, and more than double the amount issued in the entire month of August last year.

The Fed’s announcement on March 23rd that it would start buying corporate bonds and bond ETFs set off a huge rally in the bond market, including in the junk-bond market.

The rally started before the Fed ever actually bought the first bond. And then the Fed hardly bought anything by Fed standards. Through the end of July, it bought just $12 billion in corporate bonds and bond ETFs, including a minuscule $1.1 billion in junk bond ETFs. It’s not even a rounding error on its $7-trillion mountain of assets.

But the announcement was enough to trigger the biggest junk-debt chase in the shortest amount of time the world has likely ever seen. And it kept the zombies walking, and it generated a whole new generation of zombies too.

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US Bankruptcies Are Already At 10-Year High As Pandemic Takes Its Toll, by Tyler Durden

Posted on August 15, 2020 | Leave a comment

The draconian Covid-19 response has raised the curve on bankruptcies, business failures, and unemployment. From Tyler Durden at zerohedge.com:

Gold and silver sold off when Russia announced that it had an effective vaccine for coronavirus. This plays into the myth that a cure for COVID-19 will cure the economy. But, as SchiffGold.com notes, there is plenty of evidence suggesting the damage to the economy is deep and will likely have long-lasting impacts even when the pandemic is in the rearview mirror.

We’ve reported on a number of these signs.

In fact, bankruptcies are already on track for a 1o-year high.

Infographic: U.S. Bankruptcies at 10-Year High As Pandemic Takes Its Toll | Statista

You will find more infographics at Statista

According to S&P Global Market Intelligence, 424 companies had filed for bankruptcy as of Aug. 9.

This exceeds the number of bankruptcy filing for any comparable period since 2010.

S&P Global Market Intelligence’s bankruptcy analysis includes public companies or private companies with public debt. Public companies included in the list of companies with public debt must have at least $2 million in either assets or liabilities at the time of the bankruptcy filing. In comparison, private companies must include at least $10 million.

Recent filings include Men’s Wearhouse owner Tailored Brands Inc.; Prysm Inc., a company that develops large display screens; oil driller Fieldwood Energy Inc.; and Summit Gas Resources Inc., which acquires, explores and develops domestic onshore natural gas reserves.

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A Surge in Small Business Bankruptcies is Underway, by Mish Shedlock

Posted on July 15, 2020 | 4 comments

Long after Covid-19 is but a memory the economic consequences will continue to play out. From Mish Shedlock at thestreet.com:

The new rules make it easier for small businesses to file for chapter 11. And they are.
Small Businesses Walking Away

In 2008, homeowners walked away from mortgages.

Thanks to the Small Business Reorganization Act of 2019 (SBRA), in effect as of February 19, 2020, small businesses have an easier shot at doing the same.

 

For example, the Twisted Root Burger grew quickly, but co-founder now says ‘I’m gonna walk away’ from some locations.

Twisted Root Burger was a Texas success story, expanding from one casual restaurant in 2006 to 24 sites including restaurants, bars, a brewery and a theater. Now, the company is moving fast in another direction—into bankruptcy.

“I’m not gonna open that restaurant at half the revenue,” said co-founder Jason Boso. “I’m gonna walk away from those restaurants. I’m not gonna set myself up for failure.”

More than 500 companies filed for bankruptcy under the small-business bankruptcy rules since February, according to the American Bankruptcy Institute. June was the top month for filings with 131 cases; many were filed in states hit hard by the pandemic like Florida, Texas, California, New York and Illinois.

“It was somewhat prescient,” said Ryan Wagner, a restructuring and bankruptcy attorney with international law firm Greenberg Traurig LLP. “It was passed without the foresight of the pandemic.” The law is the most significant change to the bankruptcy code since 2005.

SBRA Highlights

  • Applies to businesses with $2.7 million in liabilities, raised to $7.5 million under coronavirus stimulus
  • Owners continue operating their business while in court
  • Owners can retain equity after exiting bankruptcy
  • Owners can modify residential mortgages if home was collateral for a business loan
  • Faster turnaround to save time and minimize legal fees
  • Owners generally have three to five years to repay creditors
  • Creditors can be paid based on a business’s projected income

Walking away gets a new lease on life, this time for small businesses.

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The Great American Shale Oil & Gas Massacre: Bankruptcies, Defaulted Debts, Worthless Shares, Collapsed Prices of Oil & Gas. by Wolf Richter

Posted on July 11, 2020 | 1 comment

The carnage in the oil and gas patch has been gruesome. From Wolf Richter at wolfstreet.com:

The bankruptcy epicenter is in Texas.

The Great American Oil Bust started in mid-2014, when the price of crude-oil benchmark WTI began its long decline from over $100 a barrel to, briefly, minus -$37 a barrel in April 2020. Bankruptcies of US companies in the oil and gas sector started piling up in 2015. In 2016, the total amount of debt listed in these filings hit $82 billion. Bankruptcy filings continued, with smaller dollar amounts of debt involved. In 2019, the shakeout got rougher.

And this year promises to be a banner year, as larger oil-and-gas companies with billions of dollars in debt collapsed, after having wobbled through the prior years of the oil bust.

The 44 bankruptcy filings in the first half of 2020 among US exploration and production companies (E&P), oilfield services companies (OFS), and “midstream” companies (gather, transport, process, and store oil and natural gas) involved $55 billion in debts, according to data compiled by law firm Haynes and Boone. This first-half total beat all prior full-year totals of the Great American Oil Bust except the full-year total of 2016:

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