5 ms·

S&P warns 1 in 10 US firms may default on debt

23 points by finphil 7y ago

SQueeeeeL 7y ago
It's kind of amazing that 10% of our economy is basically living on the knifes edge of revenue and liability like this. It might just be a bad mentality, I know in Japan, they have a tradition of corporations building up a massive treasury, but the US is basically the exact opposite
- pwaivers 7y ago
  I don't think 12 months without revenue is "living on knifes edge"
  - weare138 7y ago
    That's kind of the problem. We don't view companies that go 12 months without revenue as high risk and/or failed investments anymore. How long can companies like Uber continue to raise capital to operate when they're only generating a fraction of the revenue now and investors won't accept the long term risk?
    - o-__-o 7y ago
      As long as money is cheap, the rich (VCs, Angels) will throw cash at you to satisfy their tax liability. A unicorn going public is just a side benefit.
- rebuilder 7y ago
  I think it'll be amazing if only 10% of US firms default on debt in the next year or so.
- smabie 7y ago
  But Japan hasn't been doing really well either. They've been in a recession for like 30 years straight.
ASalazarMX 7y ago
They didn't save for the hard times? It was their own choices that caused them to default. They should just pull themselves up by their bootstraps.
- draw_down 7y ago
  Why should they? The government will take care of them.
- lmilcin 7y ago
  Of course, companies should save to face possible hard circumstances. In ideal world. In real world, conservative company that save large portion of their income will loose competition with a company that does not have this kind of infinite game thinking. The events that really test and reward companies with infinite thinking are rare and far between, allowing those without that kind of constraint to flourish inbetween. Now, it depends what is thought to be public good. It might be in public (US) good to give aid to those companies to keep being competitive against foreign powers. Even though you may not like the fact and you may think it is not fair to reward short term thinking it might still be in your good interest to pony up. I don't have knowledge and mental model to decide whether this is in fact good or not. Somebody should probably do some kind of estimation of possible effects to figure out what is the right course here.
  - viklove 7y ago
    > it might still be in your good interest to pony up It's not in our good interest, but yes, it is indeed in our masters best interest, so that's exactly what they're going to do. Socialism for wealthy corporations, rugged individualism for the rest of us. That's how it works here in the US.
  - ASalazarMX 7y ago
    For the record, I'm not hating companies that live day to day, the race to the bottom forces them to. I'm mocking the idea that if you struggle financially, it's always your fault and you should have known better. There are always factors out of our control, company or individual, even if bigger entities have more factors under their control.
BenoitP 7y ago
The source article: https://www.spglobal.com/ratings/en/research/articles/200204-coronavirus-impact-key-takeaways-from-our-articles-11337257 https://www.spglobal.com/ratings/en/research/articles/200204... From their earlier article: https://www.spglobal.com/ratings/en/research/articles/200317-economic-research-covid-19-macroeconomic-update-the-global-recession-is-here-and-now-11392265 https://www.spglobal.com/ratings/en/research/articles/200317...
rasz 7y ago
Did they swap numbers by accident? I expect 9 out of 10 to default.

23 points by finphil 7y ago

It's kind of amazing that 10% of our economy is basically living on the knifes edge of revenue and liability like this. It might just be a bad mentality, I know in Japan, they have a tradition of corporations building up a massive treasury, but the US is basically the exact opposite

pwaivers 7y ago
I don't think 12 months without revenue is "living on knifes edge"
- weare138 7y ago
  That's kind of the problem. We don't view companies that go 12 months without revenue as high risk and/or failed investments anymore. How long can companies like Uber continue to raise capital to operate when they're only generating a fraction of the revenue now and investors won't accept the long term risk?
  - o-__-o 7y ago
    As long as money is cheap, the rich (VCs, Angels) will throw cash at you to satisfy their tax liability. A unicorn going public is just a side benefit.
rebuilder 7y ago
I think it'll be amazing if only 10% of US firms default on debt in the next year or so.
smabie 7y ago
But Japan hasn't been doing really well either. They've been in a recession for like 30 years straight.

ASalazarMX 7y ago

They didn't save for the hard times? It was their own choices that caused them to default. They should just pull themselves up by their bootstraps.

draw_down 7y ago
Why should they? The government will take care of them.
lmilcin 7y ago
Of course, companies should save to face possible hard circumstances. In ideal world. In real world, conservative company that save large portion of their income will loose competition with a company that does not have this kind of infinite game thinking. The events that really test and reward companies with infinite thinking are rare and far between, allowing those without that kind of constraint to flourish inbetween. Now, it depends what is thought to be public good. It might be in public (US) good to give aid to those companies to keep being competitive against foreign powers. Even though you may not like the fact and you may think it is not fair to reward short term thinking it might still be in your good interest to pony up. I don't have knowledge and mental model to decide whether this is in fact good or not. Somebody should probably do some kind of estimation of possible effects to figure out what is the right course here.
- viklove 7y ago
  > it might still be in your good interest to pony up It's not in our good interest, but yes, it is indeed in our masters best interest, so that's exactly what they're going to do. Socialism for wealthy corporations, rugged individualism for the rest of us. That's how it works here in the US.
- ASalazarMX 7y ago
  For the record, I'm not hating companies that live day to day, the race to the bottom forces them to. I'm mocking the idea that if you struggle financially, it's always your fault and you should have known better. There are always factors out of our control, company or individual, even if bigger entities have more factors under their control.

BenoitP 7y ago

The source article: https://www.spglobal.com/ratings/en/research/articles/200204-coronavirus-impact-key-takeaways-from-our-articles-11337257 https://www.spglobal.com/ratings/en/research/articles/200204... From their earlier article: https://www.spglobal.com/ratings/en/research/articles/200317-economic-research-covid-19-macroeconomic-update-the-global-recession-is-here-and-now-11392265 https://www.spglobal.com/ratings/en/research/articles/200317...

rasz 7y ago

Did they swap numbers by accident? I expect 9 out of 10 to default.