Companies in emerging markets are more leveraged than they were before the last big meltdown.

Here’s One Reason to Worry About Emerging Markets

A lot has changed since the late 1990s, when a period of credit-fueled growth ended in a wave of defaults and devaluations that swept from Asia through Russia and all the way to Latin America. Governments have built up big reserves to fend off attacks on their currencies, and they aren’t trying to prop up fixed exchange rates like they did back then.

But one lesson seems to have faded: the perils of debt. After a long period of relative caution, companies are borrowing more for each dollar of shareholders’ equity than they did at any point in the 1990s.

Such leverage leaves companies vulnerable at a time when rising interest rates are increasing the cost of servicing the debt — as Harvard economist Carmen Reinhart recently noted. Worse, a lot of the obligations are denominated in dollars, which makes them harder to pay off when emerging-market currencies depreciate — as they have been doing in recent weeks.

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Corporate Bonds Sink Fast in One of Worst Tumbles Since 2000

100-day losses comparable to two other slumps in 18 years
Performance as bad as EM’s may temper retail allocation: JPM

Consumer debt is set to reach $4 trillion by the end of 2018

  • Consumer debt has grown since 2012 and is poised to reach a new high by the end of this year.
  • Individuals are spending about 10 percent of their income each month paying nonmortgage debts including auto loans, credit cards, personal and student loans.
  • You should evaluate three key areas when thinking about managing these balances.
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Americans are in a borrowing mood, and their total tab for consumer debt could reach a record $4 trillion by the end of 2018.

That’s according to LendingTree, a loan comparison website, which analyzed data from the Federal Reserve on nonmortgage debts including credit cards, and auto, personal and student loans.

Americans owe more than 26 percent of their annual income to this debt. That’s up from 22 percent in 2010. It’s also higher than debt levels during the mid-2000s when credit availability soared.


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