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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
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
Lawrence McDonald Profile picture
Dec 27, 2024
If this were a stock, would you buy or sell it? Image
Apple $AAPL 2.55% bonds due 2060 are down at 57 cents on the dollar. If long-term bond yields go to 6%, take a guess where this bond will trade?

*Now think of the trillions of USD loans issued in 2017-2021 on bank balance (commercial real estate, mortgages, corporate financings).Image
Interest rates UP - Bond prices DOWN. The power of duration is on stage here. Austria sold this bond to investors in 2020. This security traded at 140 cents on the dollar at one point, today, near 41 cents.

(3) Image
Read 7 tweets
Lawrence McDonald Profile picture
Aug 17, 2024
Since 2021

Bitcoin

59k to 59k

Gold

1750 to 2500

*Last ten years - Gold’s largest drawdown? 21% vs. Bitcoin -82%, -58%, -65%, -75%.

*A store of wealth holds its value. It doesn’t lose half its value or more every few years.
No human being can put large portions of their personal wealth in an asset that drops 50-75% every few years. Gold is a colossal reservoir of liquidity, approaching a $17T market vs. bitcoin at $1.5T.

Chart from @Maverick_Equity Image
@Maverick_Equity As few as 5% of all BTC addresses own over 62% of all available Bitcoin. Thus, liquidity is far far worse than meets the eye. If one large holder needs to sell, the spread between him and the available liquidity is large (see drawdowns).

(3)
Read 9 tweets
Lawrence McDonald Profile picture
Dec 15, 2023
File under another multipolar world headline...

*MAERSK TELLS ALL ITS CONTAINER SHIPS TO PAUSE RED SEA VOYAGES
A large percentage of sea-borne container traffic goes through the Red Sea. Even cargo from Shanghai to New York goes through the Red Sea. All the cargo that goes from China to Europe goes through the Red Sea. Very few go around Africa since it's more costly. Halting this traffic has the potential to disrupt a lot of cargo traffic...Image
Drought Saps the Panama Canal, Disrupting Global Trade - The number of ships that can travel through the vital route has fallen sharply this year because of a lack of water for the locks, raising costs and slowing deliveries.- NYT

*sticky shipping - file under NOT deflationary
Read 5 tweets
Lawrence McDonald Profile picture
Oct 3, 2023
With US Treasuries at 5%, Bank of America is close to 45x levered, at 6-7% infinitely levered.


Image
For all of 2008, as Lehman was failing, the value of their core (safety) capital (US Treasuries) was moving higher, NOT lower.

*As interest rates move down, bond prices move up. Image
After the banks failed in 2008, they were forced to hold far more "quantity" and "quality" of capital. This - ladies and gentlemen - is sowing the seeds of the next crisis. This high-quality capital (US Treasuries) is in flames, dramatically lower in price.

(3)
*Boston Fed. Image
Read 10 tweets

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