Bite size updates on the Libor spike, Toy’s R Us, franking credit changes and the Banking Royal Commission
Memos
Credit Snapshots – February 2018
Bite size updates on US government debt, Chinese margin lending and bank capital
Short Volatility is a Legitimate Investment Strategy
The criticism of short volatility strategies in the wake of the recent VIX spike is misguided and uniformed. If correctly managed, short volatility strategies have a history of producing outsized returns.
IMF on China: A Downturn is Inevitable
A recent paper from the IMF concludes that China may be able to continue its current trajectory for the medium term but in the long term a downturn, likely accompanied by a banking crisis is inevitable.
Credit Snapshots
Bite size updates on high yield spreads, Puerto Rico, Venezuela and China.
Investors Should Loiter Around the Lifeboats
Investors are facing a similar conundrum to a person onboard the Titanic’s maiden voyage who knows how the journey will end. The correct response to the risk ahead is to loiter around the lifeboats in credit and equity investments.
If Australian Politicians Cared About Housing Affordability Here’s What They Would Do
If Australian politicians care about housing affordability and the quality of life of Australians, they will quit talking and start implementing these eight obvious and needed changes.
Four Lessons from Toys R Us and Puerto Rico’s Defaults
The defaults by Toys R Us and Puerto Rico were remarkably similar, even though corporate debt and sovereign debt are quite different. This article highlights three lessons that can be taken from both and one lesson that highlights a key difference between corporate and sovereign debt.
Would You Lend to Tajikistan?
The issue of bonds by Tajikistan this month follows on from recent low quality bond issues from Argentina, Greece and Iraq.
Cryptocurrencies and Blockchain are Just Reruns of 90’s Bubbles
The old saying that history doesn’t repeat but often rhymes sums up the fervour surrounding cryptocurrencies and blockchain.
BIS Nails the State of Global Corporate Debt
The Bank for International Settlements (BIS) quarterly report is always worth the read. Whilst it is academic in style and length, it consistently raises material that matters. Taken from the September report, the graphic below highlights the big issues for global corporate debt. The rest of this short article explains each component and its importance.
Emerging Market Debt: Dumb, Dumber and Dumbest
One of the classic signs that the credit cycle is nearing the end is that borrowers that shouldn’t be getting financed not only get funded, but get it at terms that seem crazy.