If there ever was a reason to believe that the Fed's Zero Interest Rate Policy (ZIRP) is the root of all evil. Then this is it.
Junk Bonds Sell With Weakest Creditor Protection Since 2007 http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=BZH%3AUS&sid=aiDDVO7nw8Y4
I just can't figure out where the ignorance comes from?
Didn't we just have one of the worst credit disasters in our lifetimes?
Crappy home builder Beazer Homes couldn't even sell debt at the height of the credit craze, yet they are able to do so today with even less loose debt covenants. Its one thing for issuers to act ignorantly, but why do investors have to act similarly? This is because debt investors as well as their nitwit equity counterparts have to take on risk! This is what the Fed wants. When rates are zero investors scramble for yield. You don't think Beaxer knows this? The Federal Reserve has effectively taken over risk management. They make the curve. ZIRP forces these type of investor decisions to be made.
No comments:
Post a Comment