re: The Lesson of Oil

I got lost in macroeconomics and just got by in intro finance classes, so I'm hanging on by a tenuous thread here, but I'm still not understanding why the bad, high-yield debt the E&P companies have is going to drive up the cost of capital in other sectors.

In my non-finance brain, I would think that the suppliers of capital (the institutional investors buying the bonds) would then look for other places to place their money. If I am in a non-E&P sector, I can offer my bonds at a lower rate because I just lost a competitor (E&P companies) in the marketplace.

Also, I'm about 40% confident what I just posted makes any lick of sense, so if I'm super far off the reservation, just don't even worry about walking me back