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One percent

Debt bomb, debt bomb, you're my debt bomb

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The list of places sound like all the places where the whites (that work for a living) have fled.

That means the banks have issued credit cards and loans to residents that on only repay in 5-a-day prayers and the odd explosion.

Repayment will not happen, as they Mussers will join their 72 virgins, disappear, or change their name to something even more difficult to enter into a computer.

So, more bad debt. Print up the money to cover the losses and nothing to see here!

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There will be a shock when interest rates do rise because at the moment banks' capital is dirt cheap and they are under governmental / BoE pressure to lend.

The rise will mean these two drives to lend disappear and we will see a return towards the near normal with proper risk rating and withdrawal of credit from doubtful cases pushing them down the Wonga route and bankruptcy. 

Add in benefits being cut through Universal Credit and it isn't going to be much fun being a feckless waster any more.

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FSA set a letter to the glubberment a couple of days ago advising them that there might be a little problem.

86% of all new cars are funded by PCP/PCH style deals, 45% of credit cards are on 0% rates and 25% of all cards have static possibly maxxed  balances.

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2 minutes ago, Chewing Grass said:

FSA set a letter to the glubberment a couple of days ago advising them that there might be a little problem.

86% of all new cars are funded by PCP/PCH style deals, 45% of credit cards are on 0% rates and 25% of all cards have static possibly maxxed  balances.

That all sounds very sustainable.

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11 minutes ago, onlyme said:

Arse covering by the FSA after the fact, after the debt has been built up, after the motor trade is linked to short term finance.

Learn't nothing.

Thats the exact inpression I got when I read it. Keep quiet till the last minute then cover your arse, civil service at its best.

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Financial Report From March:

Quote
Yesterday, the Federal Reserve released the minutes from its March policy meeting.
Typically, these reports contain few surprises. But this one was an exception... and the
market wasn't happy..
.
The minutes showed the Fed plans to begin shrinking its $4.5 trillion balance sheet later
this year. In simple terms, this means the Fed will stop reinvesting the cash from
maturing U.S. Treasury bonds and mortgage debt back into these markets.
 
This isn't a surprise... the Fed has been discussing these plans for months. But this is
the first time the central bank indicated this process would begin this year.
Why is this important? First, the Fed's buying has been a big source of demand for
Treasury bonds for the past several years. As the Fed stops buying bonds, it could put
more upward pressure on interest rates. (Remember, bond prices and interest rates
move inversely... As bonds prices decline, interest rates rise, and vice versa.)

 

Toys R Us is a canary in the corporate debt bomb mine also.

It is trying to refinance before a huge way of corporate refinancing is due - needed - circa 2018 to 2020.

Quote
Between now and 2020, $1.32 trillion of junk debt is expected to come due. Most of that matures toward the end of the five-year period. So Toys "R" Us wants to cut to the front of that line. That's why we called Toys "R" Us – with its "junk" rating and its obsolete business model – the most important company in the U.S. economy.
 
In other words, they believed Toys "R" Us was something of a "canary in the coalmine" for the broad credit markets.

 

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I saw the headline about Toys R Us being on the brink but didn't realise it was owing to an impending refinancing.

I have had a very hard year getting a full refinancing through at work and am so relieved that we completed it and locked in to the gilt curve before the recent rises in long term interest rates and the expectation or more to come.

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1 minute ago, Frank Hovis said:

I saw the headline about Toys R Us being on the brink but didn't realise it was owing to an impending refinancing.

I have had a very hard year getting a full refinancing through at work and am so relieved that we completed it and locked in to the gilt curve before the recent rises in long term interest rates and the expectation or more to come.

 

We are going to see a load of companies go under in the next 2 years if the US Fed holds true to what it is claiming - cutting back on printing money to buy bonds.

Some well known names will go. Big US retailers such as Sears, J D Penny, etc, will probably disappear. There will be UK casualties also. Tesco?

Debenhams? Currys?

HMV?

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1 minute ago, The Masked Tulip said:

 

We are going to see a load of companies go under in the next 2 years if the US Fed holds true to what it is claiming - cutting back on printing money to buy bonds.

Some well known names will go. Big US retailers such as Sears, J D Penny, etc, will probably disappear. There will be UK casualties also. Tesco?

Debenhams? Currys?

HMV?

I think you're spot on with the US ones; when I go on my regular holiday to the US I will usually spend half a day in a mall and from being a busy social centre it has gone to being quite a lonely place in the big shops; Sears was the one that struck me most.

Oddly enough I don't know on the UK ones as other than the food supermarkets I don't go in them!

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1 minute ago, Frank Hovis said:

I think you're spot on with the US ones; when I go on my regular holiday to the US I will usually spend half a day in a mall and from being a busy social centre it has gone to being quite a lonely place in the big shops; Sears was the one that struck me most.

Oddly enough I don't know on the UK ones as other than the food supermarkets I don't go in them!

 

Mall companies are big shorts in the US - the death of the US mall is here.

Interestingly, restaurant chains that are based in malls, and rely on people going to Sears, J D Penny, etc, etc, have also seen their share prices plunge.

Wal-Mart shares have risen as they have seen an increase in their online sales and has potential growth there. Odd how they still are making a complete fist of Asda online.

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2 hours ago, One percent said:

As per title

list of areas with the most debt.  In the worked areas, 22 percent of residents are struggling with debt.  22 percent. Wow.  This really isn't going to end well

http://www.bbc.co.uk/news/business-41318655

 

From the link:

Quote

Andrew Bailey, the chief executive of the Financial Conduct Authority (FCA), told the Guardian that debt was a particular issue for those with erratic incomes, such as workers in the gig economy.

"Credit is a means of smoothing (incomes), but the question is how do you structure it in a sustainable fashion?

"It needs government involvement," he said.

What involvement exactly? Buying up books of wildly "subprime" debt at almost face value, I expect.

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3 minutes ago, Hail the Tripod said:

From the link:

What involvement exactly? Buying up books of wildly "subprime" debt at almost face value, I expect.

Restricting it in the first place by requiring minimum credit standards, capping APR even if at a relatively high rate like 30%, housing benefit / LHA being paid to landlords directly, withdrawl of credit licence for any serious breach.

Wasn't there something last month about credit card companies being prevented from raising a credit card limit if it hadn't been requested?

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1 hour ago, The Masked Tulip said:

 

We are going to see a load of companies go under in the next 2 years if the US Fed holds true to what it is claiming - cutting back on printing money to buy bonds.

Some well known names will go. Big US retailers such as Sears, J D Penny, etc, will probably disappear. There will be UK casualties also. Tesco?

Debenhams? Currys?

HMV?

You can track a lot of these companies demise inversely with the rise of Amazon. They would have disappeared long ago if it wasn't for the cheap money keeping the execs in new Mercs and giving them time to start raiding the proles pension funds. Think Tesco will pull through but Debenhams/Currys/HMV are definitely fucked. In fact I thought HMV had already gone under.

Edited by gibbon

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11 minutes ago, Frank Hovis said:

Restricting it in the first place by requiring minimum credit standards, capping APR even if at a relatively high rate like 30%, housing benefit / LHA being paid to landlords directly, withdrawl of credit licence for any serious breach.

If only.

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4 minutes ago, gibbon said:

You can track a lot of these companies demise inversely with the rise of Amazon. They would have disappeared long ago if it wasn't for the cheap money keeping the execs in new Mercs and giving them time to start raiding the proles pension funds. Think Tesco will pull through but Debenhams/Currys/HMV are definitely fucked. In fact I thought HMV had already gone under.

No. Its mainly debt levels and the involvement of PE cranking up debt and removing cash from the company.

Toys R Us- PE/debt.

Debs - PE/debt.

 

 

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6 minutes ago, gibbon said:

You can track a lot of these companies demise inversely with the rise of Amazon. They would have disappeared long ago if it wasn't for the cheap money keeping the execs in new Mercs and giving them time to start raiding the proles pension funds. Think Tesco will pull through but Debenhams/Currys/HMV are definitely fucked. In fact I thought HMV had already gone under.

 

Yep, Amazon is one big reason. I also read a report last night that said that the rot actually began in the late 90's when Wal-mart began selling toys - it began the move for food retailers into toys, white goods, black goods, clothing, etc.

It is hard to think back now but back then the likes of Wal--mart, Tesco and Co only used to sell food.

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2 minutes ago, spygirl said:

No. Its mainly debt levels and the involvement of PE cranking up debt and removing cash from the company.

Toys R Us- PE/debt.

Debs - PE/debt.

 

 

So Amazon didn't come along and destroy these companies business models then? Sure.

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1 minute ago, The Masked Tulip said:

 

Yep, Amazon is one big reason. I also read a report last night that said that the rot actually began in the late 90's when Wal-mart began selling toys - it began the move for food retailers into toys, white goods, black goods, clothing, etc.

It is hard to think back now but back then the likes of Wal--mart, Tesco and Co only used to sell food.

Makes sense. I'll do anything not to have to go into town or drive to the larger shopping estates/malls. Will try to get what I can via the supermarkets or online and only as a last resort the high street. Must be a lot of people who feel the same.

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8 minutes ago, gibbon said:

Makes sense. I'll do anything not to have to go into town or drive to the larger shopping estates/malls. Will try to get what I can via the supermarkets or online and only as a last resort the high street. Must be a lot of people who feel the same.

Snap, used to use Currys for washing machines etc as I have access to a van to get one at the drop of a hat. Now they are delivered direct next day for less money theres no point.

 

Don't do fashiom so clothes are irrelevant as well.

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20 minutes ago, gibbon said:

So Amazon didn't come along and destroy these companies business models then? Sure.

Obviously the competition hasn't helped much, but Toys R Us is fundamentally (well, EBITDA) a profitable company.  It is the PE debt that is killing it.

I don't know why PE takeovers are allowed.  They only ever seem to screw everyone up.   A 2 minute edit to GAAP and the tax rules would sort it out.  I can only think they (bankers that define these things) don't do this because they're all making money out of the others' misfortune.

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9 minutes ago, dgul said:

Obviously the competition hasn't helped much, but Toys R Us is fundamentally (well, EBITDA) a profitable company.  It is the PE debt that is killing it.

I don't know why PE takeovers are allowed.  They only ever seem to screw everyone up.   A 2 minute edit to GAAP and the tax rules would sort it out.  I can only think they (bankers that define these things) don't do this because they're all making money out of the others' misfortune.

$400 million a year, ouch:

Quote

The bankruptcy filing in Richmond, Virginia, estimated the company has more than $5 billion in debt, which it pays around $400 million a year to service. 

Much of that is the legacy of a $7.5 billion leveraged buyout in 2005 in which Bain Capital, KKR & Co. and Vornado Realty Trust loaded the company with debt to take it private. Since then, the Wayne, New Jersey-based chain has struggled to dig itself out

 

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42 minutes ago, gibbon said:

So Amazon didn't come along and destroy these companies business models then? Sure.

Amazon provided competition.

Debt holed all these these companies.

17 minutes ago, dgul said:

Obviously the competition hasn't helped much, but Toys R Us is fundamentally (well, EBITDA) a profitable company.  It is the PE debt that is killing it.

I don't know why PE takeovers are allowed.  They only ever seem to screw everyone up.   A 2 minute edit to GAAP and the tax rules would sort it out.  I can only think they (bankers that define these things) don't do this because they're all making money out of the others' misfortune.

Leveraged PE takeovers.

There's nothing wrong with PE.

Its when the PE load up the company with debt and extract cash.

Hard to legistate for - see current hoohaa with Water utilities, which is worse a rather han go bust the consumer has to pay more + more.

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58 minutes ago, spygirl said:

Amazon provided competition.

Debt holed all these these companies.

Leveraged PE takeovers.

There's nothing wrong with PE.

Its when the PE load up the company with debt and extract cash.

Hard to legistate for - see current hoohaa with Water utilities, which is worse a rather han go bust the consumer has to pay more + more.

They holed themselves too - tied for ever rising rent claims, I honestly thought the going rates for commercial would reset post 2008, double whammy of collapsing finance/overextension/bleeding of profit margins in the face of direct competition - that should have reset metrics. 

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