Is everyone familiar with the term "Zombie Corporation"
If not the accepted definition is
"Zombie companies are indebted businesses that, although generating cash, after covering running costs, fixed costs (wages, rates, rent) they only have enough funds to service the interest on their loans, but not the debt itself. As such they generally depend on banks (creditors) for their continued existence, effectively putting them on never-ending life support."Now does that describe SNDE and a bunch of other companies (btw at present its estimated that 20% of all US companies and 10% of EU companies are Zombies). In an age where "monetary policy" easing is the norm and access to credit is cheap and easy, this encourages enterprises of all sizes into debt markets (multiple times even) — creating an oversupply of almost everything (except items like toilet paper and hand sanitizer - LOL). "Free Money" has created a corporate world cluttered with zombie firms competing against "real" companies.
https://www.pymnts.com/economy/2020/will-zombie-companies-eat-the-us-economy/This is not a COVID-19 problem. The debt problem had started to show its teeth in 2019 ... and the expectation was that a recession would occur in 2020. COVID-19 destroyed global demand for almost everything, turning even "real" companies into Zombies, and triggering an economic collapse ... not always evident though in our everyday life ... but it is when you look at unemployment and Debt to GDP for instance.
So if monetary easing and Zero Interest Rate Policy (ZIRP) was "The Beginning" of economic collapse where are we now and where are we going?
(1) The Beginning (of the End) has been played out with ZIRP
(2) The Empire Strikes Back (just finished?) with massive stimulus and bailouts. Corporates and free money to citizens
(3) Zombies Attack (i.e. Corporates go bankrupt) ... which leads to massive unemployment. Now what this does to the financial system could be catastrophic if banks are holding worthless corporate debt .... which is why Fed is buying BBB and above corporate debt from banks.
I think this may be where we are at present. Where it heads to who knows ... maybe
(4)Do Run Run, A Do Run Run ... (that would be a bank run) now I haven't personally seen this happen but we came close with the GFC which was more about a liquidity event. This is more about a solvency event. An avalanche of corporate failures would decimate the value of the holdings of banks, insurance, pension funds, mutual funds, stock funds, bond funds .... you name it ... even real estate falls in a heap. Massive deflation. That causes the run on cash from the bank. Now you have no liquidity and and even greater run on the bank to get you cash bank (remind yourself about how safe are our banks (DSIBs) and the GSIBs). And if that isn't bad enough, imagine if COVID-19 isn't contained (or beaten). Global commerce grinds to a halt. Now all that's left is for the Govt to put money directly into your bank account --- spend it on something please --- the end of money as we know it.
(5) The Sounds of Silence ... the world is stuck in a depression and all that can now be done is simply "socialize the economy". Perhaps Google "Modern Monetary Theory". Game Set and Match.
Pretty dark huh.
All you have to do is prove that SNDE (and heaps more companies ... some much much larger) is not a Zombie. What convincing evidence is there for it not to be considered a Zombie.
That's what I think happened ... and is happening ... and hopefully doe not happen.
Probably should have played golf today and stayed off the keyboard
