'Further, as we get into late 2018 and then into 2019 (not to mention 2020), the amount of high-yield debt that has to be “rolled over” becomes significant..''More from John:
"I was probably making two calls a day to my go-to guys in the high-yield market, to see how high-yield bonds were responding. I think ultimately the collapse in high-yield will precipitate “the Big One.” You just can’t understand how much in high-yield bonds has been sold, how poorly the covenants are managed, and how badly investors are going to get screwed.
You watched this last week as the VIX fell out of bed. I am telling you that what is going to happen in the high-yield market is going to be more – much more – of the same. It’s going to seemingly fall out overnight. The bids are going to disappear, and high-yield bonds are going to be sold to what are essentially distressed-debt funds at distressed-debt prices.
Further, as we get into late 2018 and then into 2019 (not to mention 2020), the amount of high-yield debt that has to be “rolled over” becomes significant. And it is obviously going to have to be rolled over at higher interest rates. There will be some companies that will be able to handle those rates, and there are some companies that are simply way out over the tips of their skis, trying to schussboom down a double black diamond slope, and the outcome is going to closely resemble one of those “agony of defeat” moments from the old Wide World of Sports TV show. We’re talking some spectacular face plants. You do not want to be involved, unless from the short side, when that happens." '
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On My Radar: The Volatility Flash , Crash Explained, February 9, 2018
Context'With another $2.7 TN of QE in 2017, central bankers pushed the envelope too far .. There will be a very steep price to pay.'In speculative markets, the early wipeouts are canaries in the coalmine, February 7, 2018
Peak Hubris, February 7, 2018