IMF Financial Stability Report Says Debt Binge Leaves US Corporate Assets Exposed

IMF says debt binge leaves US corporate assets exposed (ft.com)

IMF says debt binge leaves US corporate assets exposed (ft.com)

A debt binge has left a quarter of US corporate assets vulnerable to a sudden increase in interest rates. This is an issue Path Financial has been watching and writing about since 2015 (read our most recent analyses on this topic here (“Beware the Mountain of Debt” and here (“This is Where the Next Debt Crisis Will Come From“).

In its twice-a-year Global Financial Stability Report released earlier this week (April 19, 2017), the International Monetary Fund warns that the ability of companies to cover interest payments, by one measure, is at its weakest since the 2008 financial crisis. Historically, the scenario of large debt accumulations, combined with rising interest rates, rarely ends up well. Investors should be paying close attention to these red flags.

At Path Financial, our portfolio management process is focused on measuring and managing risk — a strategic and effective approach in creating a sensible balance between risk and return. Contact us to learn how we can help safeguard your investments: 941.350.7904.

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Junk-Bond Wake-Up Call Column Quotes Raul Elizalde of Path Financial

herald tribune logoIn his newspaper column in today’s Sarasota Herald Tribune, contributing columnist Ernest “Doc” Werlin quoted Path Financial President and Chief Investment Officer Raul Elizalde on the topic of the current challenges facing the junk-bond market. Drawing from Path Financial’s Dec. 15 article for investors, “Junk Bond Troubles Could Be the Tip of the Iceberg,” Werlin noted Elizalde’s comment that “it’s too soon to say the worst is over for investors….It took over a year for the earliest signs of serious problems in the mortgage bond market to metastasize into the collapse of Lehman Brothers and a full-blown financial crisis.” Werlin also quoted Carl Icahn’s Dec. 12 appearance on CNBC where Icahn “warned that a lack of liquidity could cause the high-yield market — otherwise known as the junk-bond market — to implode and contribute to a broad market crisis.”

Read Werlin’s full column here.

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