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Rubicon Associates
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Rubicon Associates is headed by a Chartered Financial Analyst with over 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, he has analyzed and invested in both public and... More
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  • Downgrade Risk Increasing 1 comment
    Dec 26, 2012 8:10 AM

    Just read on Bloomberg:

    Standard & Poor's and Moody's Investors Service are cutting corporate debt ratings at the fastest pace since 2009 as a global economic slowdown and record borrowing erode credit quality.
    The ratio of ratings downgrades to upgrades worldwide climbed to 1.85 this year from 1.23 in 2011, according to S&P data.

    This should come as no surprise to anyone as low rates have made borrowing attractive and an easy way to lower the WACC. Unfortunately, instead of using these funds to invest/grow business, they have been used for dividends and share repurchases.

    I would expect the trend to continue and increase the spread duration risk of fixed income portfolios. Keep your eye on the ball.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: credit, bonds
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  • Brad Thomas
    , contributor
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    MT - good to see you back on the blog...something else to consider:
    http://seekingalpha.co...

     

    Happy Holidays, Brad
    26 Dec 2012, 08:41 AM Reply Like
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