“Gleanings”

Sandpiper Capital’s Quarterly Economic and Market Commentary

July 2020

March saw a severe dislocation in the markets with sellers swamping the system with enough vigor that anyone witnessing it would wonder if there were any buyers out there anywhere. As a result, in a really unprecedented move, governments around the world have been propping up security prices in the expectation that doing so will allow companies to sell stocks and bonds. They’re hoping companies can continue to raise cash (this is the primary function of the securities markets) and avoid the defaults and bankruptcies that would otherwise be inevitable.
It’s too late for Hertz, J. Crew, Neiman Marcus, JC Penney, GNC, Chuck E. Cheese and about 4,000 other companies that have folded this year but survivors have raised over a trillion dollars in the bond market and are selling stock at the fastest pace since 2014. This has been a great strategy for keeping companies solvent. It remains to be seen whether it will be enough to avoid a collapse. I would not want to be one of those buying in these circumstances.

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