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Lawrence McDonald Profile picture
@Convertbond
Apr 1, 2020 • 5 tweets • 3 min read • Read on X
Sovereign Credit Risk is on the rise, where are the opportunities?

We’re hosting a call with @ACGAnalytics at 2pm ET, inquiries here

thebeartrapsreport.com Image
Hosted a solid client call, meaningful takeaways covering political implications for oil prices, Saudi / Russia EM Credit risk and the IMF's heavy load.
*IEA SAYS OPEC+ 10M B/D CUT NOT ENOUGH TO STABILIZE OIL MARKET
Two sides to every story, one large reason why KSA and Russia have had enough. Bottom line, there are lots of debts and leverage on all sides - coupons to be paid. So far, pumping has been the only solution to fend off a large default cycle.

#SaudiArabia
#MBS
#Oil
#Shale Image
*RUSSIA IS READY TO CUT PRODUCTION BY 1.6M/BBL A DAY: TASS

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More from @Convertbond

Lawrence McDonald Profile picture
May 26
There is a price for higher for longer - it's NOT free. Interest rates up, bond prices down.

*Top Four Japan Insurers See $60 Billion in Unrealized Bond Losses - Bloomberg.

**Q: Mark to market losses on this one Apple $AAPL bond?

A: $805M. Image
In October of 2023, Bank of America $BAC equity traded near $24 ($43 last week), with the U.S. 10 year Treasury yield at 4.91% (4.51% last week). Thank God for the Fed's Bank Term Funding Program (BTFP), but a lot of these losses are now sitting on the Fed's balance sheet.

(2) Image
CMBS issuance in 2021 totaled around $119B, $65B in 2020, $96B in 2019, $171B in 2018, $95B in 2017 - Trepp, Bloomberg data. Everyone knows, the larger, more sophisticated banks in the USA use interest rate hedges, that's NOT the base for regional and super regional banks. Image
Read 5 tweets
Lawrence McDonald Profile picture
May 24
Book Ideas - "When Markets Speak" - Top Themes --Nuclear Power - AI Infrastructure - Think of this . The $NUKZ ETF is up 25% in May, top 3 holdings are only worth $250B vs. $3300B for Nvidia $NVDA

*Passive investing (Indexing, S&P 500) has everyone's capital in the wrong trade. Image
A Historic week. This is a WW2 like initiative. National security, the USA is WAY behind China. Friday, executive orders were signed. The White House wants to 4x domestic production of nuclear power within the next 25 years, @elonmusk has been making this point for 36 months.
@elonmusk EIA - last 10 years, more than 34 gigawatts (GW) of nuclear power capacity were added in China, bringing the country’s number of operating nuclear reactors to 55 with a total net capacity of 53.2 GW as of April 2024. An additional 23 reactors are under construction in China. Image
Read 6 tweets
Lawrence McDonald Profile picture
May 21
.@SpeakerJohnson warning, you guys are smoking in the dynamite shed. Image
The Limited Life Cycle of a Democracy

Bondage
Spiritual faith
Great courage
Entrepreneurship
Private property rights
Liberty
Abundance
Complacency
Apathy
Dependency
Bondage

*Book - “When Markets Speak” Image
Image
The next few days is all about Speaker Johnson's levers attempting to appease the Freedom Caucus (austerity faction). Poor Bond Auctions - The USA needs more global bond buyers. Once the debt ceiling is lifted there is a colossal bond selling catch up process coming soon.
Read 5 tweets
Lawrence McDonald Profile picture
Apr 7
What do Bonds Know?

*Last 20 years, large equity market risk-off events have -- always -- brought in "flight to quality" buyers of long duration U.S. Treasuries. Not this time.

**Book Ideas - "How to Listen When Markets Speak" on Amazon. Image
Largest Destruction of Equity Capital in the US

2022: Wars / Inflation -$10T (11 months)
2025: Trump tariffs: -$9T (6 weeks)
2020: COVID: -$9T (1 month)
2008: Lehman: -$8T (12 months)

*A powerful, colossal secular shift with a HIGH impact on your portfolio is developing. Image
When equity market (S&P 500) investors were struck by the Lehman (-55%) and Covid (-35%) drawdowns, they were blessed with long-term bonds. As yields plummeted, bond prices soared. We estimate the bond offset in capital destruction saved investors $7T. (3)
Read 14 tweets
Lawrence McDonald Profile picture
Feb 24
Does President Trump realize he has to destroy everyone's 401k to Make America Great Again?

(1)
"What multiple do you put on companies that are forced to invest by the state?" with @ces921

*Apple is 7.5% of the S&P 500's composition; a decade ago, the top three holdings were close to that weighting. Image
After a stern talk with Trump - AAPL announced this morning plans to “spend and invest” more than $500B in the US over the next four years, including opening a new advanced manufacturing facility in Houston to produce servers that support AI and doubling its U.S. Advanced Manufacturing Fund (from $5B to $10B, including a multibillion-dollar commitment from Apple to produce advanced silicon in TSMC’s Fab 21 facility in Arizona.

(3)
Read 4 tweets
Lawrence McDonald Profile picture
Jan 4
Serial Convertible Bond Issuers

SunEdison*
Chesapeake Energy*
SunPower*
Molycorp*
Lehman*
iStar Financial*
Calpine*
Fannie Freddie*
Enron*
Tyco*
Adelphia*
Six Flags*
eToys*
Avaya*
Worldcom*
Tesla
Coinbase
Microstrategy

*went bankrupt.
The Last Saloon (2)

"Over the last 30 years, companies issuing more than one convertible bond in a three-year period – filed bankruptcy protection over 80% of the time, our research showed."

thebeartrapsreport.com/blog/2020/07/2…
"MicroStrategy Targets $2 Billion Capital Raise. It's All to Buy More Bitcoin." DJ

"MicroStrategy's plan aims to raise $21 billion of equity and $21 billion of fixed-income instruments, including debt, convertible notes, and preferred stock, over the next three years." $MSTR
Read 6 tweets

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