UJB - What Blows Up First? Part 8: Leveraged Corporate Loans

By now just about everyone understands what junk bonds are and why they matter. But there's a non-publicly traded version of this kind of debt that's also soaring and has recently caught the Fed's eye. Called leveraged loans, these are loans made by banks to companies with weak balance sheets - defined as debt exceeding six times EBITDA, the broadest measure of cash flow.

The dynamic with leveraged loans is the same as with junk bonds (and margin debt, mortgages and car loans), which is to say the longer an economic expansion lasts, the more

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