On March 12 we began this special series on COVID-19 with a sense that America would soon be forced out of schools, offices, and all group activity. Little did we know six weeks later 97% (according to one study) of the US population is either at home or sheltering in place. This state of affairs…
This week we wrap up our conversation with Brian Nick, Nuveen’s chief investment strategist: The Lead Left: Brian, how do you compare this cycle with the last one? Brian Nick: The last cycle ended because of an excess of leverage and risk-taking by individual households and within the financial system as a whole. The housing…
“As goes COVID-19, so goes the nation.” Paraphrasing the famous 1950’s dictum on General Motors’ relationship to the welfare of America highlights how the coronavirus has hijacked all aspects of the economy. There’s consensus that once the disease runs its course, commercial activity will come back. It’s also agreed that between now and then GDP…
“We did not underwrite for this.” So said the managing partner of a top-tier middle market private equity firm. In a conversation last week, he spoke of the challenges and uncertainties surrounding the impact to businesses of COVID-19. “We always model downside scenarios for any investment we consider,” he said. “But the zero revenue case…
“The three main U.S. stock indices closed at record highs as concerns over the coronavirus outbreak’s economic impact seemed to fade.” – Barron’s, February 12, 2020. Perhaps not the “Dewey Beats Truman” of media misreads, but this quote reflected widely shared sentiments among market participants. “Can anything stop this rally?” the columnist went on to…
This week we’ve been doing bedchecks on our lender friends in the credit markets. We caught up with one long-time practitioner, hanging out in the home office with family (as he put it) in “bathrobes and bunny slippers.” But clearly plugged in. “The capital markets went from price perfection to price combustion,” he told us….
In our January 8th 2020 commentary, “Of Bubbles and Gum”, we reviewed credit market conditions in the wake of the assassination of Iranian General Suleimani. Could this be the exogenous factor that sparks a Middle East war, and triggers a recession? Or will it fade quickly like so many other candidates? We concluded with the…
Myth #9: “Without a public benchmark, private credit returns aren’t dependable” Private credit assets are illiquid, and don’t trade. That distinguishes them positively from larger, liquid, public, yet more volatile, assets correlated with market moves. Middle market loan yields are therefore more stable through business cycles. Also, being illiquid, private credit demands, and achieves, a…
We spent our winter break last week at an Arizona dude ranch. In the horse barn we spotted a sign: “There will be a $5 charge for whining.” Heading into the home stretch of our special series on private credit myths, we like the cost for complaining. For faithful readers of The Lead Left, however,…
Here are the next two fables in our continuing special series on myths of private credit: Myth #5: “No one uses mezzanine debt anymore.” As we detailed over four years ago (link), private sub debt regularly gets kicked around at conferences for being “dead.” This has particularly been the case since the advent of the…