Activity – Seth Golden – Finom Group

Seth Golden posted an update 5 years, 6 months ago

Always a good idea to listen to both the bull and bear case. Here is the latest from Morgan Stanley’s Mike Wilson https://www.morganstanley.com/ideas/thoughts-on-the-market?cid=SM_CORP_SM_CORP_TWITTER_MorganStanley_20190521&linkId=67853966
- Mark Minnis replied 5 years, 6 months ago
  Mike raises some valid points about Earnings. I’m unsure if an Earnings recession is imminent as Mike suggests but I’m concerned about the potential slow down in earnings on companies ability to pay interest and refinance debt. Non-financial Debt Service Coverage Ratio has been around 41% since 2017 compared to 44-45% just before the financial crisis (https://www.bis.org/statistics/dsr.htm). What fall in corporate earnings would put US
  corporations in a similar state as 2008? ( 5%) and how that would affect the stock market, especially as it has been propped up by corporate buybacks this quarter. I freely admit that the 2008 recession was caused by the consumer and overly exposed to housing. Consumers, at least in the US, are in a much better position than 2008, but I think we should consider the risks of an economic slowdown and stock market /corporate bond falls led by corporations, not consumers. The next equity market fall may have more in common on over-inflated asset values which have greater parallels with 2001 than 2008.

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