to go Ten years after the financial crisis in March 2009, reached its peak, and Fears of a new financial crisis. The overheated real estate markets. But the biggest danger comes from the time of the company.
In the U.S., the fear – in front of a new real estate crisis. After the prices knew in the past years has almost only one direction, namely upwards, you go back now, in metro cities such as New York. The price for an apartment in Manhattan has dropped year-on-year average of five percent.
the real estate crisis as a harbinger of recessions
Since 2012, have increased the prices of houses in the United States by about 50 percent. In Phoenix, Denver, and Atlanta, prices have doubled almost.
This is a bad Omen. Since the end of the Second world war, nine of the eleven recessions in the United States were initiated by a slump in the real estate market. In 2008, the massive failures of the Subprime loans in the US housing market led to the great economic and financial crisis. Could history repeat itself? Probably not, my most experts. You expect more with a “soft” landing of the US real estate market.
loans for indebted companies strong
The biggest danger could come from the company. To be precise, the companies that are highly indebted, and still with loans to be nursed. The market for so-called “Leveraged Loans”, i.e. loans to heavily indebted companies is booming. Meanwhile, this market with securitized loans, there is already a volume of 1.3 trillion dollars. So that it is larger than the market for high-risk junk bonds. And twice as large as the mortgage Subprime market in 2007, recently warned the chief of the Bank of England, Mark Carney.
The Leveraged Loans have no fixed interest rate coupons, but a risk premium on inter-Bank rates such as Libor. For borrowers with poor credit, it is now cheaper to borrow more. Conversely, the risks for creditors are on the rise. The proportion of “Covenant-lite”loans, loans with no solvency Checks, climbed to the highest level since the financial crisis.
the Fed and the Bank of England, alarmed
The Central bankers are alarmed. The Fed is worried about the huge volume of Leveraged Loans, the loans for companies with weak credit. The Bank of England recently moved Parallel to the US sub-Prime loans, whose massive failures triggered the financial crisis of 2008/09. The portfolio of Leveraged Loans is now twice as large as that of the “sub-primes” in 2007, said the Bank of England chief Mark Carney. In addition, the market is growing faster than the sub-Prime market.
The former Fed chair Janet Yellen recently warned of a new impending financial crisis. The high debt burden of American businesses make her Worry, she said shortly before Christmas in 2018, at a discussion in New York with the Star-Economist and Nobel prize winner in Economics Paul Krugman. Meanwhile, the debt amounts to about nine trillion dollars. Prior to the financial crisis, it had been almost five trillion dollars.
corporate debt in the United States to a record level
corporate debt in the United States in % of GDP (1982-2022)
financial market experts such as Feri-chief investment strategist Heinz-Werner Rapp currently seen as one of the biggest risks the company’s indebtedness. He has found out that the debt of U.S. firms has now climbed to over 45 per cent of GDP – as much as never.
Fund Manager Bert Flossbach also sees the Leveraged Loans as a potential risk for the financial markets. The financial crisis has shown that investors evaluate the risks of these “packaged” products, mostly wrong, he said. Hardly anyone knew where these loans are and who think they are.
Who is going to save the Zombies?
only in the USA, also in Europe, Leveraged Loans are awarded quite loose. More and more companies walk than zombie firms whose business is only obtained by the zero interest rates in an upright position. As soon as the interest rates go up or the first creditor in fear of the repayment of their loans, it could lead to a chain reaction: The zombie firms would get no more money and go broke. Then other creditors would withdraw their capital, which is likely to cause new failures. A Crash in the market for corporate loans would have dire consequences for the financial markets and the world economy.
source: boerse.ard.de
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