This Also Happened the Last Two Times Before Stocks Crashed

by Wolf Richter
Wolf Street

Financial Engineering Backfires

Something that happened just before the prior two market crashes, and the recessions that accompanied them, including the Great Recession, is happening again: the boom in financial engineering is starting to backfire against the companies doing it.

Their credit ratings are getting slashed, and their borrowing costs are therefore rising, even while they need newly borrowed money to buy back even more shares to keep the charade going. Until the music stops.

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