$550 Billion Energy Junk Bond Bubble Busts; "Whac-A-Mole" Distortions in Multiple Markets

"The energy junk bond bubble has finally popped. Falling crude prices were the catalyst. Junk bonds of Energy XXI Ltd. plunged to 64 cents on the dollar from 106.3 cents since September. They now yield over 27%. Energy XXI Ltd. raised over $2 billion.

Energy production is extremely capital intense, and often accompanied by negative free cash flow.

Recently I have been getting numerous cold-calls, nearly all of them energy related. These companies need money, and snake-oil salesmen attempt to get it for them.   

Energy investment added to GDP since 2010, with $550 billion in bond and loan offerings. Energy will now have a negative impact on GDP as funding dries up. And if oil prices do not head back up, expect outright defaults, and lots of them. This is what happens when bubbles burst..."

 
at http://globaleconomicanalysis.blogspot.com/2014/12/550-billion-energy-junk-bond-bubble.html#ePAbzjG6Vb0Esijq.99