Not quite true, at least not for 2020:



But it’s still an ‘n of one’ sort of experiment. What was done was done and who can really predict the paths not taken. Clearly a majority of the early deaths were the elderly (in some countries half the deaths were in those 85 and older though that’s a fairly tiny fraction of the population) and it’s clear that many of the actions were taken in knee-jerk fashion without any consideration to other competing risks. When you shut down Pap smears, mammograms, and other routine health screenings, those other diseases and illnesses don’t stop happening, they just get discovered at later more advanced stages. When you shut down education, that generation may never recover - certainly not at the margins, the kids who have the greatest learning challenges to begin with. And when you shut down a global just-in-time supply chain, it can only be recovered in fits and starts.

I’m willing to concede that many of those people had good intentions, but they looked at the issue too narrowly and too fearfully so overall, yeah, their performance and execution seriously sucked.

And worldwide, clearly the majority of people are attaining their (relative) immunity from GETTING COVID, sometimes repeatedly, not from getting two immunizations and two boosters. It’s difficult to actually say if the outcome would have been a lot worse if none of the Draconian actions had been taken. As I said, it’s an ‘n of one’ experiment.

 

It’s nothing short of comical to be reassured or try to reassure others by touting a stable B- rating in an era of rising borrowing rates. That rating should reassure no one who understands what the rating means or basic economics. And that applies to ANY bonds with a B- rating, so no, I’m not picking on AA. Nor is BBB “good” per se although it is at least investment grade at that point which is certainly better than B-.

What I posted is reality. I don’t like it any more than you do, but that doesn’t change the reality.

 

Whoa! Almost thought we lost excargodog on a Covid tangent! Back to the AA doom. Pfew!

 

just refuting a not quite accurate statement. Sorry for the digression.

Nor is it a prediction of doom, but a B- Fitch rating in an era of rising interest rates certainly warrants caution.

 

hahahahahahahahahahahahahahshahshahahaha!!!!!!!!

 

^^^^^🍻^^^^^

 

Well, I don’t know what to say to you other than count yourself among those that don’t understand the Fitch Issuer Default Ratings. The BBB rating is by very definition “good” and your opinion is irrelevant on the topic. It is their rating, and BBB is “good credit quality.” But by all means, double down on being wrong.





And again, I don’t think I can simplify this any more for you to understand. I said their rating is stable. That is a rate of change and is not a statement supporting or disparaging the rating itself. It is stable. It is not moving worse. That is the point I made that you still apparently can’t comprehend. Do you follow? B- is not good, but it is not getting worse at the moment. It is stable.


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Slow…
The rest of us get it.

 

Thanks Al.


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I fully understand stable. The problem is that the economy is NOT stable, which makes B- worse than it usually would be and even BBB less good. BBB normally is “good” but as your own posting demonstrates “adverse business or economic conditions (which we have and are about to get worse) are more likely to impair this capacity.”

The historical reason that BBB is rated good is that it is the lowest “investment grade” which allows these bonds to be bought by mutual funds whose prospectus restricts them to investment grade.

Anything below that is technically a “junk” bond. Now with the Fed into quantitative easement, even companies rated B- (and stable) could get people to buy their bonds at par with a coupon of as little as 3.5%. and lines of credit at only a little more. That’s because the Fed was damn near GIVING money away.

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But those times are over.

The Fed has been making big interest rate hikes and is likely to raise interest rates by another 75 points shortly, looking to max out at 3.4% by year end.


https://www.nytimes.com/2022/07/25/b...-increase.html


Now generally speaking, carrying a lot of debt with inflation is not a bad thing. I’ve got a mortgage I COULD pay off but at 2.5% fixed I’d be crazy to do it. But if that were a variable rate mortgage, inflation could eat me alive. And that’s a situation very akin to what we are talking about here.

Companies holding junk bonds are in the same shape. As long as they can hold on to those old rates, they are fine, or at least no worse than they were before the rate increases. But bonds have a maturity date at which time you need to pay back ALL of the par value. If you don’t have the money to do that, you have to refinance and the loan you previously had at 3.5% is now going to cost you more - typically 5% more for B- (stable) companies and sometimes even more since the assets that collateralized those bonds are now five years older and used rather than new. And it’s even worse for lines of credit that count on the liquidity side of your ledger but may actually cost you 12% annually if you tap them. At the “old” rates AA is paying about $2 Billion annually for debt service. What do YOU think they’ll be paying at the rates they will refinance these bonds at by selling new bonds?

So yeah, laugh all you want and count keyboard coup because under normal economic conditions BBB is “good.”

But it doesn’t change reality one damn bit.