Liquidity Without Solvency: Investing Opportunities in the Current Credit Market Environment

Published on
February 2nd, 2021
42 minutes

Liquidity Without Solvency: Investing Opportunities in the Current Credit Market Environment

Investment Ideas ·
Featuring Daniel Zwirn and Ed Harrison

Published on: February 2nd, 2021 • Duration: 42 minutes

Dan Zwirn, CEO and CIO of Arena Investors, returns to Real Vision to provide a strategic update on the world of credit. In this interview with Real Vision’s managing editor, Ed Harrison, Zwirn explains how, in a world of suppressed interested rates by monetary authorities such as the Federal Reserve, companies that are effectively underwater nevertheless manage to secure financing at attractive rates. Harrison and Zwirn discuss this phenomenon of “liquidity without solvency” in depth, comparing the ongoing fervor in AMC Entertainment Holdings to Hertz last summer. Filmed on January 28, 2021.

Key learnings: In industries such as commercial real estate and the oil & gas sector, Zwirn sees several opportunities to
enter the capital structure at a senior level while still earning a healthy yield. Arbitrage opportunities abound, such as going long convertible bonds while simultaneously owning a put option. For investors without access to these opportunities, Zwirn believes that they can consider hard assets such as real estate due to the devaluation of the dollar.



  • PD
    Patrick D.
    16 February 2021 @ 02:57
    Excellent discussion from both sides of the screen. The questions and the answers went sufficiently deep. A great duo to have on again.
  • DN
    Derek N.
    8 February 2021 @ 22:58
    Dan is so clear in his viewpoints and does a great job shedding a light on a very opaque industry. Would love to see him come on for interviews more often.
  • CD
    Charles D.
    8 February 2021 @ 02:29
    This is really a top class interview! Interviewee-is so insightful he also provides great detail and examples.pls provide more interviews with guys like this. Most interviews are about high level stuff. This is real world. Keep em coming
  • CM
    Cory M.
    5 February 2021 @ 23:14
    Informative and clear. Thanks Ed and Dan.
  • RI
    R I.
    5 February 2021 @ 04:06
    Glad to see a bit of RV airtime dedicated to credit; it’s only the LARGEST ASSET CLASS on our planet.
  • AK
    Andrew K.
    3 February 2021 @ 03:36
    The interviewee needs to watch Lacy Hunt's interviews. He is making some potentially fatal judgments about the economy/inflation.
    • AK
      Andrew K.
      3 February 2021 @ 03:46
      Whoops, meant to post this comment on latest interview about GME and oil
  • PG
    Philippe G.
    2 February 2021 @ 20:07
    Pleased to see Mr. Zwirn becoming a regular. Appreciate the "alternative" credit approach
    • JF
      Jack F. | Real Vision
      3 February 2021 @ 03:33
      Glad to hear, thanks Philippe!
  • TV
    Tyrell V.
    2 February 2021 @ 20:48
    I keep mentioning it, but the new crypto called benchmark protocol is going to fix these liquidity issues whilst also having a built in reward system, global stable coin and allow a distributed hedge to VOL that just does not exist! Very exciting times!! It also only has a mkt cap of $16million now, launched in Dec 20... Designed for 2021! haha
  • AK
    Andrew K.
    2 February 2021 @ 20:23
    This guy has a very balanced perspective and gives an extremely strong argument for retail investors to give him some capital for opportunities that they are locked out of.
  • DS
    David S.
    2 February 2021 @ 19:53
    There is no doubt that monetary/fiscal policy is out of control. In part this is due to the stock market having a tantrum whenever the Fed tried to normalize rates. Market mechanisms really do not work well at the zero bound. There is a bigger elephant in the room, i.e., funds like pensions that believe they can make 8% per year regardless of deflation. Many corporations recognized pension funding problems in the 70s by converted pension plans to retirement contribution plans. The pension fund concept is a dinosaur because there are so few mechanisms to adjust to the tech deflationary economy. Surprisingly, the self-directed retirement funds are loaded with money to invest in the markets passively or actively. To all this you add the volume of point and click internet derivative trading. The markets act erratically and opaque to historical perspectives even more in COVID Times. Is it any wonder that macro markets are tough to predict? The story of the day is more important than the stream of future income. DLS
  • MB
    Mark B.
    2 February 2021 @ 16:30
    Great interview
  • TS
    Thomas S.
    2 February 2021 @ 13:24
    Maybe I missed it and will have to go back to a transcript ... but with respect to the comments on aviation bonds, clearly, something with little chance of receiving interest or principal payments should not be selling for $0.80 cents on the $1. What am i missing ? If these bonds truly are "selling" in the market, not just being quoted, then someone sees things differently.
    • EH
      Edward H. | Real Vision
      2 February 2021 @ 14:27
      If I recall that section of the exchange Thomas, Dan was saying it's a mispricing that is reflective of the liquidity in the market. That's a potential case of liquidity without solvency just as AMC might end up being.
  • HK
    H K.
    2 February 2021 @ 10:34
    Good one. The convergence of reality and prices will be interesting. For companies like AMC the price is driving fundamentals- classic reflexivity