In the boom years before the pandemic, the Fed encouraged S&P 500 titans to binge on trillions in debt, now the central bank is propping them up to avoid an economic catastrophe.took the pilot’s seat at American Airlines in December 2013, it seemed as though clear skies were ahead. His U.S. Airways had finally bagged a major partner by agreeing to combine with bankrupt American.
Fast-forward to April 2020, and a contagion known as SARS-CoV-2 has leveled the travel industry. American Airlines is flat broke, in part because of Parker’s profligate spending. Now the U.S. government has agreed to advance it $5.8 billion in the form of grants and low-interest loans—the largest payment to any airline in the government’s $25 billion industry bailout package. Many hedge fund investors have sold their shares, as has Berkshire Hathaway.
A year ago, Federal Reserve chairman Jerome Powell sounded an alarm, but he could barely be heard above the roar of the ascendant stock market. “Not only is the volume of debt high,” said Powell last May, “but recent growth has also been concentrated in the riskier forms of debt. . . . Among investment-grade bonds, a near-record fraction is at the lowest rating—a phenomenon known as the ‘triple-B cliff.
“We have a buyer and lender of last resort, cushioning pain but taking over the role of the free market,” groused Howard Marks, the billionaire cofounder of Oaktree Capital, in a memo April 14. “When people get the feeling that the government will protect them from [the] unpleasant financial consequences of their actions, it’s called ‘moral hazard.’ People and institutions are protected from pain, but bad lessons are learned.
The new and improved “asset light” McDonald’s no longer manages cumbersome assets; instead, it receives those payments and is sitting on tens of billions in debt. From 2014 through the end of 2019, McDonald’s issued some $21 billion in bonds and notes. It also repurchased more than $35 billion in stock and paid out $19 billion in dividends, returning over $50 billion to shareholders, far in excess of its profit over that period.
With most of its restaurants nearly empty during the pandemic, McDonald’s stock initially fell by almost 40%. Thanks to the Fed’s intervention, though, McDonald’s debt, which at first slumped to 78 cents on the dollar, recovered along with the stock, as the company quickly raised an additional $3.5 billion. McDonald’s insists that it entered the crisis with a strong balance sheet and overall financial health. It recently suspended its share repurchases.
take a look and you will no more 🇩🇰
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Its like these businesses are diabetics and the fed keeps injecting them with glucose instead of fixing their diet.
Crappy faced art I'm feelin pukey ill in my tummy
Non Rocket Science A return to more calm and ordered public policy making on health, safety, jobs in the digital AI/automation age, and climate, ... or four extra years of a more experienced shitstorm developer. Our call.
Because a 401k was a way to dismantle worker's rights.
Year after year, as the Federal Reserve pumped liquidity into the economy, some of the biggest firms in the United States—Coca-Cola, McDonald’s, AT&T, IBM, General Motors, Merck, FedEx, 3M, and Exxon—have binged on low-interest debt
Dear forbes, you need to take down this irresponsible article that sends rich readers to vacation all around Navajo Nation. Navajo are experiencing genocidal levels of covid19 infection (they surpass NY). Also? WE DONT HAVE VENTILATORS in towns like taos.
Paul Singer where are you ? This is ripe for someone of your talent vulturecapatalist
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