We can’t escape our own debt. It’s all around us and if we’re not careful, can be lurking in the most unlikely places…like in the form of a bill that sits on the windshield of our car. This week, we’re going to dive into the world of emerging market debt. Let’s start with an “emerging market debt” example.
We’re on a world with more debt than you’d expect. That’s why we’re here. We’re looking for a way to help those who live with it, while we can’t afford to lose our way.
The main reason why emerging market debt is so prevalent is that the market is not mature. In the US, more and more companies are starting to take on debt. This has created a more competitive environment where its easier for companies to raise money. The other factor is that the US is in the midst of a recession. The average consumer may only have $1,000 in the bank, but the middle class is in a real hole.
If you are a middle class family living paycheck to paycheck, you may not spend much on your home. If that’s the case, then you know your home is going to be worth less than what you paid for it. This is when you have to make some tough decisions about what to do. If you’re a developer building an app for the iPhone, then you may be able to take some of the stress out of the decision making.
A company like Airbnb has a very high percentage of its users in the business class. The middle class is even more in debt. This is when you have to decide to move to a better location, or cut your losses and move to a cheaper one.
In the tech world we see this every day. Companies like Amazon, Apple, and Google are all building massive amounts of stock capital that will go to the next generation of companies. You can see this in the valuation of companies today. But you have to make sure you are buying the right kind of stock, in the right country, and at the right time.
I think this is a pretty important thing to understand as a newcomer. How to go from debt to equity, how to take out debt and get paid, and how to take out debt and find a company to buy. Those are all important questions in the space today. If you are a student, you should start by asking yourself these questions. If you are a student making $50,000 a year, you should ask yourself how much is too much.
There are a lot of companies out there that are just trying to get their way with the first big capital markets deal. Often times, they are just trying to get a loan, and then they need to go out and find a company to buy the company. They don’t really care about the company, and instead, just want to take advantage of someone else buying the company. You should always ask yourself all the questions above, but the real question is whether the company is worth buying.
In short, a company can be worth buying because it has a lot of debt, but also because it has a very high debt/earnings ratio (D/E ratio). The more debt you have, the more risky it is. A D/E ratio of 8-10. is a good place to start. A D/E ratio of 4-6. is where most companies are stuck.