Securities Markets in the 1980s: The New Regime, 1979-1984

By Barrie A. Wigmore | Go to book overview

Summary

The corporate bond market bore the brunt of the price that was paid in getting inflation down to 4%. Macroeconomic industrial credit ratios as reflected in tax data, Compustat, or Standard & Poor's Industrial index indicated a 20-30% decline in credit ratios, but the lowest quartile of industries suffered a 52% decline. Their interest coverage declined a shocking 74%. The same oil-related, metals, commodities, and heavy equipment industries dominated this group that appeared in the underperforming stock group. There were also credit crises in the auto, electric utility, and farm industries. All told, the fifteen industries making up the lowest quartile of declining credits and the auto and electric utility industries accounted for 53% of publicly issued, nonfinancial corporate debt between 1970 and 1984.

Recovery from these crises was not a free-market result. Chrysler Corp. received a $1.5 billion federal loan guarantee on the condition of $2.5 billion in additional benefits from other governments, banks, suppliers, dealers, and unions, and the whole auto industry was aided by auto import quotas and reduced gas mileage and environmental requirements. The electric utility industry received almost $10 billion in indirect aid for nuclear power plant construction through the Rural Electrification Administration and substantial rate relief from state regulators. In the case of the Washington Public Power Supply System, where rate relief wasn't available, there was a record $2.25 billion bankruptcy. The farm industry's problems totally disrupted the Farm Credit Administration, which had to be reorganized and refinanced in 1985.

The junk bond market evolved in this period from its early arbitrage origins, when credit measures were sustainable and returns superior to treasuries and other corporate bonds into a merger-financing tool with credit ratios barely half of those previously. As we shall see in the next chapter, it and the changing circumstances in the oil industry were catalyzed into a fourfold expansion of the merger market by the Reagan administration's historic relaxation of the antitrust regulations.


Appendix 8.1 Technical Notes on the Industry Credit Comparisons

Industry data for the above credit comparisons are drawn from industry aggregates in the Standard & Poor's 500 and Compustat, trade associations, and government reports. All of the data sources have inconsistencies and inconveniences, but these can be minimized by choosing carefully among sources. The Standard & Poor's data was the preferred

-295-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Securities Markets in the 1980s: The New Regime, 1979-1984
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 424

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.