Discover and read the best of Twitter Threads about #earlycycle
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CLO Equity Distributions (even in 90s Long more painful Recession) can turn off in a Recession for a bit .. even a long one… trade down to 20c.. & then catch up for the majority of deals.. BBBs ok.. BBs are a tweener (No man’s land) & AAA are the best Risk Adjusted Sweet Spot.
CLO Equity is a Very Attractive Asset.. in a Rising Rate environment especially in Year 3 of a Recovery:
1) 10x Levered Collateral Debt Securities
that are top of Cap structure.. where Issuers seeing higher EBITDA Op Lev Trump Rates… expression of Econ Strength.
1) 10x Levered Collateral Debt Securities
that are top of Cap structure.. where Issuers seeing higher EBITDA Op Lev Trump Rates… expression of Econ Strength.
2) Rising Rates (Front End) doesn’t impact EBITDA early in Cycle.. coz most issuers tend to start swapping out Rates by buying Payers or Caps (4 non myopic issuers).. & match against LIBOR payable to Banks.. so lock in longer term funding coupons.. & start to de-leverage..
S&P: April Manufacturing
“The rate of overall growth ‘Accelerated’ for the 3rd Month running & was the ‘Sharpest’ since last September.”
$XLF #Reflation
“The rate of overall growth ‘Accelerated’ for the 3rd Month running & was the ‘Sharpest’ since last September.”
$XLF #Reflation
But 2s10s…
So let me see here…Consumer Spending + Manufacturing are Both “Sharply” “Accelerating”….. can someone explain what exactly is weak in the Real Economy? Oh right Powell jams us into Recession coz of Yesterday’s news priced in by 2s10s silly….”It will all end in tears.” Got it.
First legit debate….
As far as the part about moving Private Leverage to the Public Balance Sheet.
Public Debt funded Reagan’s SDI, 9-11, 2008 GFC & Covid Near Depression (-5% 1Q20 & -31% 2Q20 GDP w 15% Unemployment)
Question is… has Public Debt/GDP Peaked at 135%?
Question is… has Public Debt/GDP Peaked at 135%?
The question for Investors (longer term horizon) is when do you sell $XLF ?
The answer is when Deposit Betas finally catch up to ~50% or 10Y3M Inverts Investors start to Pay Less & Less for every $1 of earnings power (driven by the Flow Through Rate of Inflation)….
The answer is when Deposit Betas finally catch up to ~50% or 10Y3M Inverts Investors start to Pay Less & Less for every $1 of earnings power (driven by the Flow Through Rate of Inflation)….
Long Term “Investors” who respect the Credit Cycle Started selling $XLF at the Peak of Price/TBV on $BKX in Jan 2018 at 2.1x & also long $ZROZ …as Deposit Betas were Peaking + Cyclicals/Commodity stocks like $CAT etc..
The other natural question that should pop up is…well if the Taper is coming & BKX is 1.8x…why shouldn’t 1 sell now? Won’t the Fed kill the Cycle w QT.. why on earth would 1 wait around… after doubling/tripling money from the March 20 bottom.. why wouldn’t 1 crystallize gains?
