"Lee and I were talking about how quickly market confidence can change, and Jamie Dimon's recent comments came up. The JPMorgan chief doesn't mince words, and his warning about growing credit risk sounded like someone who has seen this story before. Lee reminded me of the summer of 2007, when early signs of trouble at Bear Stearns set off alarms that most investors ignored."
"I mentioned that two major risks now threaten the economy. The first is the persistence of junk-rated corporate debt, a legacy of Michael Milken's era, where many firms continue to borrow cheaply despite deteriorating balance sheets. The second is the surge in subprime consumer credit. Many borrowers are sitting on 72-month auto loans or zero-interest credit cards, even as the value of their cars has fallen far below the debt attached to them."
Jamie Dimon characterized growing credit risk and warned that isolated defaults often precede wider distress. Two recent bankruptcies—Tricolor and First Brands—exemplify early cracks appearing across different sectors. Memories of Bear Stearns in 2007 underscore how small failures can presage broader unraveling. Two major risks now threaten the economy: persistent junk-rated corporate debt amid weakening balance sheets, and a surge in subprime consumer credit. Many consumers carry long auto loans or promotional-credit balances while collateral values decline. In some situations, debt values are approaching or exceeding enterprise values, increasing potential for systemic contagion.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]