There’s More To The Story Of Ultra-Junk Finance

There is a article out by David Stockman about the of the egregious ultra-junk-bond strip mining going on in the financial rat lines.  The descriptive of the dividend cycling is spot on, but I have an alternate view about the motives of money managers.

Stockman writes: “The freshly borrowed cash from a leveraged recap often does not even leave the closing conference room—it just gets recycled out as a dividend to the LBO sponsors who otherwise hold a tiny sliver of equity at the bottom of the capital structure. … The ultra-junk paper which funds these leveraged recaps is bought for one reason alone: Money managers are desperate for yield and as the cycle nears its peak, they simply close their eyes and buy bonds that have an overwhelming chance of default.”

I am not aligned with the view that these are blind buyers. Rather, “money managers” are deliberately buying this garbage. I see an epidemic of criminal activity — not desperation and stupidity. It’s an inside job. How else would one explain 1.8% Spanish yields and other such toxic landmines? You need much more than out-of-control central banks and desperate buyers to carry out a fraud of this magnitude.

Real investigations will not be conducted on this because the very agencies and regulators tasked with keeping the criminals at bay are either colluding with them or are getting paid to look the other way. I wouldn’t be at all surprised to discover that the Deep State is closely associated with this scam as well.

Don’t hold your breath waiting for the well-tamed U.S. financial press to shine a light on the activity. Even more outspoken and well-meaning critics like Stockman are not recognizing this activity for what it is: another large scale criminal operation. I imagine that during the last five years of out-of-control central-bank intervention, the Parasite Guild cabal has purged any money managers unwilling to get with its new program. They have replaced them with sycophants.  The social science term for this is “negative selection”,  in this case on steroids.