It may now seem obvious that a “car vending machine” business that never generated positive earnings shouldn’t have taken on billions in debt. But it's worth a closer look at the ways Carvana was a poster child for several trends caused by Fed policy.
Prior to COVID, a handful of startup types with negative cash flow got access to capital via the high-yield bond market — think Carvana, WeWork, Tesla, Uber and Netflix.
However, a decade of quantitative easing and ultra-low rates pushed high-yield bond investors — those who lend to riskier, lower-rated companies — to stretch toIt was a classic “crowding out” effect, Christopher Miller, senior analyst and director of capital markets at Neuberger Berman, tells Axios. "Many people in the world really haven't seen a rising interest rate environment, and what risks that can pose," Miller says.just this past February when it was already well-understood that the Fed would be raising rates for some time.The big picture:
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