| Zombie companies need cheap money to survive. Cheap money is a thing of the past, and casualties are piling up. It’s a familiar script: borrow money to fund growth, and compete on price. That business model fails when interest rates rise quickly. As debt-burdened, low-cost providers get squeezed by higher rates, more will fail. The irony is that culling weak companies may actually be inflationary—a knock-on effect the Fed will not welcome. My guest this week is a Mauldin Economics favorite—Barry Habib of Highway.ai. Barry is concerned about the Fed’s approach to data. He fears it is looking for clues in the rear-view mirror. Looking ahead and extrapolating trends would give the Fed a better perspective and less incentive to raise rates. There are a lot of variables in the real estate market that influence the relationship between rates and prices, and Barry and I cover them in our conversation. You can learn more about Barry and his excellent mortgage and real estate research here: https://www.highway.ai/ Stay informed on the big trends by subscribing to Global Macro Update here: https://www.mauldineconomics.com/go/JM499Z15/YTB Please stay in touch by following me on Twitter @EdDAgostino: https://twitter.com/EdDAgostino Time stamps: 0:36 The rise of Zombie companies as Fed actions start to break things. 4:20 The staggering number of publicly traded zombie companies and why their demise could be inflationary. 6:18 Why progress on inflation will slow, and the role of housing in the CPI. 13:52 New construction and the impact on rent prices. 15:47 Why housing prices will not come down. 18:20 The outlook for interest and mortgage rates. 24:40 The downsizing and return-to-work trends and the housing market. 32:38 How over $100 billion in new government bond issuance could affect interest rates. |
Each week, investors and financial professionals around the globe turn to John Mauldin to better understand Wall Street, global markets, and the drivers of the world economy. And for good reason. John is a noted financial expert, a New York Times best-selling author, a pioneering online commentator, and the publisher of one of the first publications to provide investors with free, unbiased information and guidance—Thoughts from the Frontline—one of the most widely read investment newsletters in the world.
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