Equity markets continue to party today even as plenty of bad news continues to make headlines. Today Neiman Marcus filed for bankruptcy–most likely the company was headed to court anyway–the Covid 19 just sped things up a bit–of course current lenders stepped forward for $675 million in new financing–good money after bad–another Zombie. Of course this is just the tip of iceberg and further economic damage will roll out each day for the balance of year.
Whether economic conditions are getting better won’t be known for months because we don’t even know where we are economically. Quarterly results being released now for the quarter ending 3/31/2020 are mostly ‘old news’.
I did note today that California is now forecasting a $54 billion budget deficit–wow–looks like the Fed will need to speed up the printing press–no doubt in my mind that loans will be made to the states that are bleeding. Minnesota entered 2020 with $2.4 billion in their ‘rainy day fund’, but now it is gone–current forecast is a $2.4 billion deficit which is likely to worsen. The state is now considering potential layoffs–no ill will toward government folks, but either taxes are going up or costs are coming down.
Zombie companies—and Zombie jobs will be with us for quite a while. Payroll Protection loans (PPP) keeps folks on the payroll while they stare at their phones playing Candy Crush–no added value–just a different name for money from the government instead of calling the person ‘unemployed’. Business that are poorly run and who depend on massive leverage or who have outrageous amounts of debt continue to operate when by all rights they should probably go broke.
Again over 3 million folks filed for unemployment in the last week—tomorrows employment report will show the carnage–BUT I don’t expect a market reaction–we all know they will be terrible–maybe a little less terrible–maybe a little more terrible–just terrible.
I am mostly watching today, although I bought a 1/2 position in the Wintrust Financial 6.875% Fixed-Rate reset issue which began trading today. Really I like the terms of the issue, but generally can’t get excited in moving higher than 70% invested–want dry powder and plenty of it.