Smaller companies generally spend a much higher % of their income on debt service, making them more sensitive to rising rates.
The interest coverage ratio (operating income / interest expense) for the small cap S&P 600 is 2.3 times vs. 7.6 times for the large cap sp500. Source: Charlie Bilello
The US Federal debt is set to DOUBLE in just 8 years, rising from $20 trillion in 2017 to $40 trillion in 2025.
Currently, US Federal debt is rising by a whopping $1 trillion every 100 days. To put this in perspective, if US debt hits $40 trillion in 2025 that would be a $17 TRILLION increase since 2020. That would be a ~570% jump in US Federal debt since 2000, a 25-year period. The worst part? This analysis assumes that we are on track for a "soft landing." What happens if a recession hits? Source: The Kobeissi Letter, BofA
Is there a chance for the us to start slowing down the pace of debt increase?
Well... think about this: "I'm the king of debt. I'm great with debt. Nobody knows debt better than me." - Donald Trump Source: Ronald-Peter Stoeferle, CMT, CFTe, MSTA
Cartoon of the Day by Hedgeye
$34.6 TRILLION and counting... Are we past the point of no return?
Debt
Source: Hedgeye
World debt has crossed $225 TRILLION.
This is unlike anything we’ve seen. Source: Game of Trades
The interest payments on US Federal Government Debt have surpassed a $1 trillion annual rate, increasing 98% over the past 3 years
Source: Charlie Bilello
When you invest in US debt, think twice...
In Q4 2023, nominal GDP grew by 3.2% according to data on Wednesday. This would mean a $334.5 billion increase in nominal GDP. Meanwhile, over the same time period the US added $834.2 billion of debt. In other words, it cost us $2.50 of debt for every $1.00 of GDP last quarter, according to Zerohedge. As Fed Chair Powell recently said, "we are on an unsustainable fiscal path." What's the long term plan here? Source: The Kobeissi Letter, www.zerohedge.com
