GE , one of the largest and most steady of debt issuers, is paying off massive of debts. Pay Attention.
[GE] said it doesn’t expect its GE Capital unit to sell new long-term debt for at least five years, effectively eliminating one of the biggest corporate issuers at a time when firms around the globe are tapping the market at a record clip… (ZeroHedge)
GE is massive and very well run. The 2008 crisis put it on the end, because the massive leverage in the system in effect brought down all the huge leveraged players. So, why are they not taking the bait of nearly free and easy money ?
Let’s first understand that the world-wide central banks are a cartel run for private gain. The gain comes not in the form of the profits of the central bank but the looting of nations that can occur is you can front run the boom bust cycle. By control of short-term interest rates and other regulatory powers, private central banks have a huge influence on the timing of business cycles. Boom-busts have always occurred – long before central banks, but with the establishment of the Bank of England as the first central bank in the modern era onwards, they have played a central role in manipulating the extend and duration of these natural cycles. Even the founders of the US understood this, and the assassinations of presidents in the 19th century can be traced to the battle to establish a central bank in the US :
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” -James Madison
These intelligent men were not conspiracy theorists (they were true conspirators and action to their conspiracy !!! conspiracy and acts occur everywhere – it is the nature of man – tell that to your moron friends if they ever mention conspiracy theory ) – so we have been forewarned but why do we allow the oligarchy to rule us ?
So let’s examine the commodities sector, First, there was this massive boom and with super low rates, free money was given out. Then as the cycle turned, the knife was put in to those who drank too much. The best example is Batista who went from being worth $35B to negative !
According to Bloomberg’s Billionaires Index, Eike Batista’s net worth peaked at $35 billion but now he owes $1.2 billion, making him the first ever negative billionaire
Next the cartel had their Saudi lackeys
destroy the oil market by pumping more than required, reversing their long-standing policy of being the swing player, and the resulting bankruptcies have started. Now, we see the usual gang of oligarchs come in and buy things up – as Jefferson warned :
In the case of Shell, one of the Kings of the oil markets from the earliest days, I believe they moved too soon as the market has much more downside and the down cycle will take a few years longer was China works out its forced economic restructuring. See the iron ore collapse back to the $35 as in the old days..
So what do we make of GE, doing the opposite of almost every other corporate who are issuing massive amounts of debt for practically free ? Clearly, they have learned their lesson. I have in my past job collected bankruptcy information on over 2000 companies, the boom-bust pattern is almost always the same – it amazes me that in the boom so few pay down debt – one reason is that the competition will buy out lower valued companies with debt as the equity value will be suppressed during the boom times if you refuse to go along with the debt fueled growth as everyone else. This is the gun to the head that forces even those desirous of being prudent to drink the spiked Kool-Aid.
It is unlikely anyone will buyout GE, but they clearly have seen the light or are getting the signal that the free money is about to be taken away. As with the oil market, when the interest rate “market” swings the other way – watch out – the turn will be epic !
We are already seeing the massive distress in the rates markets for a number of reasons – mostly having to do with stupid regulation and accounting standards (which is also regulation of another type) :
1. The need for securities collateral as credit support in OTC products. Cash shocking is not king as it inflates balance sheet and thus higher capital charges under new Basel accords. (well the oligarchs can try to control things, but they are not much smarter than the rest of us and in any the universe is smarter and will always win in the end).
2. Basel III raising the capital charges on high yield. This is causing the market for HY to get thin and volatile. In fact, the point of regulation was to reduce leverage in the system and now that it is happening, the market is getting sparse in unexpected places.
3.Capital charges under Basel III is decimating the repo business. Repo is the instrument that probably is the most responsible for the massive increase in leverage since 1998 – I remember when the Japanese IBs were the first to massive increase leverage through repo – before the repeal of Glass-Stegall in the US and the subsequent rise of the US megabanks and their repo leverage. Repo previously allowed nearly endless rehyp, esp UST bills which used to often have near 0% HCs. With increased balance sheets and higher capital charges due to changing regulation, repo exposure is being reduced.
4. Centalized clearing of swaps and the futurization of the OTC market is killing the profitability of rates desk everywhere. Thus, less money in IBs to support rates activities (but more money for the users of IR swaps! ).
5. High frequency and algo trading is also driving out cash players who used to provide true liquidity to the market.
The net result is a severe shortage of sovereign collateral. Repo rates are negative (indicating that participants will pay you to take money as long as they good collateral !) , we have flash crashes in Treasuries(Oct 15th !) , and rates are absurdly low for countries that in essence bankrupt. The hoarding and scarcity of good collateral will now be made worse by the withdrawal of GE which is also treated as money-good.
The smart money at GE must be seeing that the we are headed for an event in the interest rate markets, and have decided to go against the trend. Like in the oil and commodity markets, I expect the money changers to give a push in the same direction once the connected have positioned correctly.
Who was positioned correctly in the 2007/2008 crisis? The connected and/or astute clearly got out in late 2006/ early 2007 – around the world I noticed similar activity. Financials peaked in Feb. 2007 – long before Lehman which was allowed to go under by the sharks who thought they could control the outcome, but then needed a bailout when the whole edifice nearly collapsed.
Sam Zell was of the them, one of the connected , clearly told everyone and if you look at who was selling right before the top, you will find the usual suspects.
One sign of an imminent crack is the sale of Equity Office Properties Trust in the biggest leveraged buyout in history. Sociotimes
The deal was for $36B in real estate the first epicenter of the crisis. Seem similar to the GE deal ?
Perhaps the Jewish prophesies are correct in September 2015 :