Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

AI Summary. 40% of companies in the Russell 2000 index of small-cap US firms have negative earnings, a share that typically rises during recessions. If the economy enters a recession, many middle-market companies would be vulnerable to the combination of high interest rates and slowing growth.

Torsten Sløk Apollo
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Citing that 40% of Russell 2000 firms have negative earnings, Torsten Sløk @apolloglobal argues that “if the economy enters a recession, a lot of middle-market companies will be vulnerable to the combination of high rates and slowing growth.”

How vulnerable are small-cap US companies to a recession?

Core argument: 40% of companies in the Russell 2000 have negative earnings, a share reached before the economy has entered a recession.

During recessions, the share of unprofitable firms rises. This is not surprising. But even before the economy has entered a recession, the share of companies in the Russell 2000 with no earnings is at 40%. The bottom line is that if the economy enters a recession, a lot of middle-market companies will be vulnerable to the combination of high rates and slowing growth.

Takeaways by Macro Roundup® AI

  1. 40% of companies in the Russell 2000 have negative earnings, a share reached before the economy has entered a recession.
  2. The share of unprofitable firms rises during recessions.
  3. If the economy enters a recession, many middle-market companies will be vulnerable to the combination of high rates and slowing growth.

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  • Where Are All the Defaults? — One explanation for subdued high-yield bond spreads is that the lowest-quality borrowers, those most likely to default, have migrated from high-yield markets into private credit. Moody's reports the number of issuers with its lowest speculative-grade ratings has fallen, and that 62% of its rated universe is rated single-B or below.
  • Can Corporate America Cope With Its Vast Debt Pile? — Average funding costs in the $8.6tn US investment-grade corporate bond market exceed 6%, roughly 3x their lows of below 2%, while average coupons in the $1.3tn high-yield market are 9.4%, more than double their lows. Moody's projects the US default rate will peak at 5.4%, or as high as 14% if conditions worsen.
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