Social Capital CEO and early Bitcoin investor Chamath Palihapitiya is issuing a warning that many of America’s biggest firms could be ransacked by growing debt burdens.
The investor tells his 1.6 million Twitter followers that the biggest secret hiding in plain sight right now is the “massive debt wall” about the hit Corporate America.
“A ‘debt wall’ is a term that describes how much debt is due at various times. If a lot of debt comes due at the same time, it puts a lot of pressure on a company…
Prepare for a bunch of companies who will not be able to refinance their debt and will thus see their equity value incinerated. This will hit the private equity industry very acutely, whose core playbook involves wrapping their companies in gobs of high yield debt.
That said, this will also ultimately create opportunities for those with capital on the sidelines to act as a buyer and recap the best of these companies.
Expect a bunch of articles about potential corporate bankruptcies starting this fall…lots of money to be made if you’re paying attention.”
Palihapitiya recently forecasted that interest rates would be staying “higher than you want” for “longer than you like”, particularly on the heels of China cutting rates as its economy slows.
“I think what Powell was forecasting is that if China starts to basically turn on the money printer and go through a huge spate of quantitative easing, it’s going to just inflate everything because they’re just a critical artery to the world economy and so you just have to get prepared for rates just being sticky and inflation being sticky, and I think that’s probably the most reasonable base case for the rest of the decade.”
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