Heads and Tails

News reached us last week of a two-headed snake found in the Pine Barrens of southern New Jersey. The young timber rattlesnake(s?), nicknamed Double Dave, was discovered by two environmentalists, Dave Schneider and Dave Burkett.

Co-headedness, known as polycephaly, happens rarely in nature, and occasionally in finance. Double Dave’s brains operate independently. But two heads aren’t always better than one: They fight for food and can’t react quickly to predators. So these oddities don’t last long in the wild. “We’ll take care of it,” said one of the Daves.

In some cultures two-headed animals are seen as bad luck. Certainly the leveraged loan market is beginning to feel snake bit. On the one hand, public markets remain buoyed by hopes that trade talks will eventually be resolved constructively. Yet on the other, interest rates ratcheting lower signal a recession could be around the corner.

Hear a rattling sound? That’s the serious coinage exiting retail loan funds – $36 billion in the past 42 weeks (see Chart of the Week). No one’s partying like it’s 2006. Yes, deals are getting done, but the buy-side remains cautious.