Most investors are concerned about the size of government debt. They should be. Deficits are out of control, with interest pushing debt-to-GDP higher as the cost of past excesses. Primary debt remains high with no controls in sight, yet the problem is broader.
There is a strong demand for private capital given the strong increases in global capex. The private sector is competing with public markets for savings, and the cost of capital is increasing. Technology is showing strong capex, but the commodity sector is also demanding capital. Beyond energy, there is a strong need for many metals, which is finally leading to more capex after the decline in the aftermath of the commodity supercycle in 2008.
The competition for capital is real, but it is not clear that public markets are a better credit.
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