The share price drop of Countrywide caught my eye as Countrywide are the biggest estate agency and lettings network in the UK.
3 years ago the share price was over £5 but in the last week it has dropped to less than 50p, a drop of over 90%!
Now I am sure there are multiple reasons this has happened but I wanted to look at debt. This is another company that is being eaten up by the increase in interest rates, is the rate of company failures speeding up?
This is the History of UK bonds since 1984:
It is easy to see that rates have been falling for 30 years, this is a very long cycle. BUT there are signs now that the cycle has reversed and interest rates are on the rise.
If we look back over the last 30 years, every time a company renegotiates it's debt, the rate been going down each time, meaning for a given interest charge the amount of money they can borrow goes up. Venture capital companies and stock market companies have used this to extract trillions from the market as they can make a lot of money by loading up other companies with debt and/or buying back shares so their profits look bigger. Whilst this goes on the amount of debt in the system increases.
What is happening now, with interest rates starting to increase, is that the tactics used are now working in reverse. The interest payments on debt are increasing and the amount companies can borrow is decreasing. Countrywide (like Carilion) shows how quickly this can turn round.
As banks lose more money and end up owning more shares in companies, they will become more averse to these types of settlement which will make them look at their loans and tighten criteria which then loops back round to make the whole problem worse.
The only thing to stop all this is for governments to print 4 times more money than they printed last time* and the next time they will have to print 4 times as much money again and so on...
The point is that all these companies should go out of business as they have borrowed too much money and/or they are not productive in the current environment. This will then create new opportunities for good entrepreneurs who can take advantage of new developments to create more productive companies. This is what the future of the UK needs to be.
Unfortunately many of us have lost trust in the government to do the right thing as have all the other people with potential investment money. This is why there is limited good investment in the UK future and instead we continue to gamble with financial instruments or buy and sell houses to each other for forever increasing values.