A major theme over the past few weeks has been the unwinding of the cheap debt economy. Experts predict this will lead to increased bankruptcies, failed start-ups and zombie companies. WeWork made it official by filing for Chapter 11 this week, while many companies are looking at a “Maturity wall” in 2025 and will need to rollover five-year loans into higher interest rates.

Despite current exuberance for a soft landing, indicators of the dismal science point toward falling demand means softening consumer activity. Homeowners are locked into mortgages with the golden handcuffs of low interest rates. Automotive retailers also report a failing demand for EVs as the vehicles pile up on lots.

Though GDP expanded at an 4.9% annualized rate economist still think that there is trouble ahead. The yield curve remains inverted and an under investment in traditional fuel sources likely mean lower supply and higher prices in the future.

TOPICS

• Bankruptcy
• Fed Rate
• Recession
• Real Estate
• Corporate Debt
• EV Technology
• Environment

Commercial real estate seems to be stabilizing, while the housing market has gone cold. Meanwhile in China, Country Garden issues a dire warning and has missed loan payments. This could unlock a fresh hell of financial worries.

The speculative bubble in use cars continues to unwind and is shaking out weak companies like Shift Technologies who filed for Chapter 11 this week. Meanwhile Tesla continues to lower prices to both chase higher volumes and to also compete with BYD.

As soon as the Fed stopped raising rates everyone began speculating when rate cuts would begin. Some think higher for longer and others believe that history indicates cuts sooner. Either way a rate cut will be a temporary boost for borrowing. Long term, near-zero rates are gone, and the economy needs to adjust its risk-reward equation.

Profitability and debt reduction among companies is a high priority. Rising rates will ensure that weak and heavily indebted companies meet an end. Likewise high valued scaleups like Airtable need to mind the bottom line and show significant revenue to justify their valuations. All in all, the number of shutdown startups is rising as companies begin running out of money and are unable to raise.

TOPICS

• Real Estate
• Automotive
• Bankruptcy
• Fed Rate
• Profitability
• Corporate Debt
• Stock Market

Bankruptcy, fire sales and corporate debt.. all part of the cycle. Banking news buried a couple of important stories this week. Bed Bath and Beyond was the big news, but the current cycle is also taking down Jenny Craig. Meanwhile Darden is scooping up Ruth’s Chris Steak House that has struggled since the pandemic. 70 major bankruptcies so far and counting, but AI & ML threatening to disrupt more businesses.

TOPICS

• Bankruptcy
• Mergers and Acquisitions
• Corporate Debt
• AI and ML

A couple of surprises this week. Primarily the better-than-expected corporate earnings reports which seem to point toward a realistic soft landing. What that looks like remains to be seen, but positive news is balanced against an all too expected bankruptcy by Bed Bath & Beyond and overall long-term anemia of the automotive industry.

TOPICS

• Real Estate
• Automotive
• Stock Market
• Corporate Debt