MM 20 November 2020
Quotes
• “It grates me to call them “junk bonds” … they are a debt instrument that trades more on the underlying credit risk of the company or the industry than on movements in interest rates. ...
• “Debt isn’t good. Debt isn’t bad. For some companies, close to zero debt is too much leverage. For other companies, nearly 100 percent much higher levels of debt can easily be absorbed.”
• “The right time for a company to finance its growth is not when it needscapital, but rather when the market is most receptive to providing capital.”
Lockdowns and social peace
Markets & Macro news
The reason to quote Mike Milken
Proof: Defaults rise and credit spreads narrow?
Proof 2: negative yields on Chinese government bonds, just as the pace of state owned Chinese corporate bankruptcies is spiking..
This must be the contrarian call as expectations for rising yields may be too consensual
And as the political gridlock may limit amount of of money flooding into the real economy
As the stock market is still flirting with new highs, profits are still falling
A speculative fever fuelled by low commission retail brokers and leveraged margin accounts
Complacency in the option market or another form of leverage?
Price mo wins over value considerations it seems ... internet bubble like valuation
Themes, Sectors & Corporate news
Some loss making business models are striking it when it’s hot
Taking the money whilst it’s there
And cashing in on the current mood
Here is another hedge for the younger generation
XBR is clearly taking share from XAU…although the later’s pullback could be an interesting entry point
After the US, UK just raised its defense budget by 10% or GBP 16bn. Recipients: BAE (19% of sales in the UK), Leonardo, Meggitt and Thales (4% in the UK)
Lithium theme
Crop yield below expectations in Brazil, just as world is starting to price in a post Covid world (coffee shops reopening + Brazilian Real rebounding on rising commodity outlook)… worth a look
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