26 February 2019
Question: What is the size of consumer debt in the U.S. currently?
GE chief’s $21bn sale of life science business propels break-up strategy – Pg. 1
– …the high price for the unit, which provides tools for medical research and the development of advanced therapies, would enable GE to be more patient in selling other businesses
– Among the transactions likely to be delayed – o even cancelled – is the public offering of its remaining healthcare business, which had been expected in the second half of this year
– Shares in GE are up more than two-thirds since the decade-long lows of December. They jumped 15% after the deal was announced yesterday, though they pared gains and were up 9% in afternoon trading
– GE will retain its other main life sciences business, pharmaceutical diagnostics, which it sees as a better fit with medical equipment such as scanners
Buffett offers rare admission of failure in saying Berkshire overpaid for Kraft – Pg. 1
– Kraft Heinz is also struggling to adapt to changing consumer tastes. Mr Buffett said it had misjudged the “retail versus brand fight”, referring to retailers that push own brands over labels such as those of Kraft Heinz
Crispr treats human with gene editing – Pg. 13
– …treat patients with blood disorder beta thalassaemia, which affects the movement of oxygen around the body and restricts growth
– …patients have stem cells that create blood cells collected and edited using the new technology based on the Cas9 enzyme, which binds to DNA and cuts it, shutting off the gene. The edited cells are then placed back into the body in a stem cell transplant
– The announcement comes after a Chinese scientist provoked uproar last year by using the Crispr technology to genetically edit babies
OECD warns corporate bond investors over ‘fallen angels’ risk in downturn – Pg. 19
– Corporate bonds worth about $500bn could become “fallen angels” within a year of an economic downturn, …after a decade-long boom in debt issuance
– The volume of outstanding corporate debt has doubled in real terms in the 10 years since the global financial crisis…with bonds issued by non-financial companies totaling more than $13tn at the end of 2018
– Companies from advanced economies, which account for four-fifths of the total bonds outstanding globally, have seen volumes grow from almost $6tn in 2008 to $10.2tn in 2018
– …driven down the overall quality of corporate debt
– Triple B rated bonds, the lowest investment-grade rating, accounted for 30% of all investment grade bonds outstanding in 2008. By 2018, they made up 54% of the issuance…
– The OECD said its own proprietary index of corporate bond ratings, weighted according to the amounts outstanding, has now been below triple B plus for nine consecutive years – the longest period since 1980
– In January, Jay Powell, …cited corporate debt as a risk that could amplify a potential downturn if highly leveraged companies were forced to resort to lay-offs
– The OECD also noted that there had been a marked decrease in bondholder rights, in the form of scrapped or weakened covenants, that could “amplify negative effects in the event of market stress”
– Covenants are clauses in the bond contract designed to protect the interests of investors, such as capping the total amount of debt that a company is allowed to take on
Answer: $13.5tn