Credit Chaos and Fool’s Yield: Updating the Thesis

Published on
March 24th, 2020
Duration
43 minutes

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11

Credit Chaos and Fool’s Yield: Updating the Thesis

The Interview ·
Featuring Dan Rasmussen and Greg Obenshain

Published on: March 24th, 2020 • Duration: 43 minutes

Dan Rasmussen, the CIO and Founder of Verdad Capital Advisers, speaks with his colleague Greg Obenshain, Verdad's director of credit, to examine the credit market sell-off over the past two months. They focus on the recent widening of spreads and other areas of financial markets hit hardest by the recent acceleration. Rasmussen asks Obenshain what the biggest factors for returns in corporate credit are, the turmoil in the credit markets has impacted the energy sector, and where they see the biggest opportunities for investors will be coming out of the crisis. They also update Verdad's Fool's Yield thesis that the company has been writing about since January 2020 and that Rasmussen has presented to Real Vision members in the past few months. Filmed on March 17, 2020 over Skype.

Comments

Transcript

  • AH
    Amir H.
    31 March 2020 @ 00:34
    0 0
    Superb discussion, evidence based, deep insights.
  • km
    kristopher m.
    27 March 2020 @ 01:29
    1 0
    excellent.
  • DS
    David S.
    26 March 2020 @ 22:51
    0 0
    Great insights to the bond market. A small comment on the length of the question. It is difficult to answer a compound complex question. If the preamble to a question is too long, it confuses the response. There is a golden mean between too little preamble and too much. Thanks. An excellent discussion. DLS
  • CW
    Claude W.
    24 March 2020 @ 21:46
    4 0
    Valid analysis if frame of reference is time period back to early 1990ies. Looking at a longer history and the possibility of a looming depression, the current opportunity in high yield - in the language of the presenters - may end up revealing itself as a fool's yield...
    • DS
      David S.
      26 March 2020 @ 22:23
      0 0
      We all need to remember that professionals watch the markets daily. They will change as they see the facts change. I was thinking in a similar line with MMT and possible inflation a 5% percent yield may not be enough. DLS
  • RM
    Russell M.
    25 March 2020 @ 13:23
    1 0
    Helpful, common sense insights. Be very careful about industry sectors you invest in. Check the business headlines to see where we can expect wholesale defaults.
  • PC
    Petros C.
    25 March 2020 @ 10:23
    4 0
    Can you please comment on HYG (iShares iBoxx $ High Yield Corporate Bond ETF) for both short & medium term outlook? Raoul has talked about HYG in recent videos.
  • ML
    Mehdi L.
    24 March 2020 @ 14:59
    1 0
    I cannot find any online broker that allows retail investors buying corporate bonds, even for US accredited investors. Any website you'd recommend?
    • ED
      Etienne D.
      24 March 2020 @ 17:03
      1 0
      if i wanted, i could place an order with interactive brokers. but well...
    • DR
      Derrick R.
      24 March 2020 @ 19:58
      1 0
      Not sure if this helps but in yesterday's daily update they talked about this. LQD was mentioned. iShares iBoxx $ Invmt Grade Corp Bd ETF
    • TW
      Tom W.
      25 March 2020 @ 02:33
      0 0
      Try TD Ameritrade
    • MP
      Mate P.
      25 March 2020 @ 06:00
      0 0
      these are mostly otc
  • TW
    Tom W.
    25 March 2020 @ 02:47
    1 0
    Excellent interview, you addressed many questions I’ve had of late. I’m currently holding BBBY 2034 bonds (Moody’s Ba2), which are down dramatically in the past few weeks. They have a solid balance sheet, however profitability is far from what it used to be. Active investors and new management are taking steps to turn it around, but success is not certain. My plan was to hold to maturity. I’ve been on the fence on whether this is a good opportunity to add more, or cut losses here. Would appreciate it if you would share your thoughts on such a scenario. Thank you!
  • MT
    Matt T.
    24 March 2020 @ 19:27
    0 0
    What are the best options for retail investors to get this type of exposure to corporate credit?
    • DR
      Derrick R.
      24 March 2020 @ 19:58
      2 0
      Not sure if this helps but in yesterday's daily update they talked about this. LQD was mentioned. iShares iBoxx $ Invmt Grade Corp Bd ETF
  • BC
    Bruce C.
    24 March 2020 @ 18:44
    1 0
    Great session. Congrats on the call you guys saved me a bundle. Raoul you though the down cycle could last 18 - 24 months and you made a comparison to 1930. I remember a former professor of mine who was a Rhodes Scholar said he thought that the down cycle of the 1930s was prolonged because taxes were raised to pay for all the new social programs. With all the fiscal stimulus, we'll have a lot of debt and I would expect higher taxes.
  • MF
    Max F.
    24 March 2020 @ 18:34
    3 0
    Great interview guys! Any thoughts on BBB downgrade wave which some people say is coming?
  • DD
    Darios D.
    24 March 2020 @ 10:16
    7 0
    Thank you for the informative interview. Would love to see more content from Dan and Verdad Capital Advisers.

Chapters

  1. 00:01:40
    The Fool's Reach for Yield
  2. 00:06:21
    What has the Credit Sell-Off Looked Like Over the Past Two Months?
  3. 00:13:23
    What Area of the Market is Hit Hardest by this Financial Acceleration?
  4. 00:18:33
    What is the Potential for Return after this Meltdown?
  5. 00:23:20
    What is Your Current View of Energy Credit?
  6. 00:26:24
    What is the Biggest Factor in Determining Corporate Credit Returns?
  7. 00:34:03
    How are You Viewing Investment Opportunities Now?
  8. 00:38:16
    The Intersection

Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yuskois the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets. Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office.Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation. Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.Mr. Yusko received a BA with Honors from the University of Notre Dame and an MBA in Accounting and Finance from the University of Chicago.
myusko@morgancreekcap.com

Anthony Scaramucci

SkyBridge Capital, Founder & Co-Managing Partner

Prior to founding SkyBridge in 2005, Scaramucci co-founded investment partnership Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001. Earlier, he was a vice president in Private Wealth Management at Goldman Sachs & Co. In 2016, Scaramucci was ranked #85 in Worth Magazine’sPower 100: The 100 Most Powerful People in Global Finance. In 2011, he received Ernst & Young’s “Entrepreneur of the Year –New York” Award in the Financial Services category. Anthony is amember of the Council on Foreign Relations (CFR), vice chair of the Kennedy Center Corporate Fund Board, a board member of both The Brain Tumor Foundation and Business Executives for National Security (BENS), and a Trustee of the United States Olympic & Paralympic Foundation. He was a member of the New York City Financial Services Advisory Committee from 2007 to 2012. In November 2016, he was named to President-Elect Trump’s 16-person Presidential Transition Team Executive Committee. In June 2017, he wasnamed the Chief Strategy Officer of the EXIM Bank. He served as the White House Communications Director for a period in July 2017. Scaramucci, a native of Long Island, New York, holds a Bachelor of Arts degree in Economics from Tufts University and a Juris Doctor from Harvard Law School.
AScaramucci@skybridge.com

Michael Saylor

MicroStrategy, Co-Founder

Mr. Saylor is a technologist, entrepreneur, business executive, philanthropist, and best-selling author. He currently serves as Chairman of the Board of Directors and Chief Executive Office of MicroStrategy, Inc. (MSTR). Since co-founding the company at the age of 24, Mr. Saylor has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. In 2012, he authoredThe Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot onThe NewYork TimesBest Sellers list. Mr. Saylor attended the Massachusetts Institute of Technology, receiving an S.B. in Aeronautics and Astronautics and an S.B. in Science, Technology, and Society.
saylor@microstrategy.com

Alex Saunders

Nugget's News, Founder & CEO

Alex Saunders is the founder and CEO of Nugget’s News, a digital media company focused on all things crypto. Alex has been captivated by cryptocurrency since 2012 and in 2017 he began educating globally on the benefits of cryptocurrency and how to safely acquireit. Nugget’s News has been listed as a top-20 podcast by Business Insider, ShapeShift and Lifehacker and has over 120k YouTube subscribers with 9 million total views.Alex is also heavily focused on his cryptocurrency education platform Collective Shift which currently serves over 4,500 members. provides his unique perspectives by utilising his expertise in fundamental analysis, technical analysis and market sentiment. He is working towards his mission of making it easier for everyone to understand the financial world.
alex@nuggetsnews.com.au

James Putra

TradeStation Crypto, Inc., Sr. Director of Product Strategy

James helped launch TradeStation Crypto’s offeringwhichutilizesa true online brokerage model that self-directed investors and traders have come to expect for equities, futures,and foreign currency markets. He is a reputed crypto asset specialist and blockchain thought leader focused on helping people find innovativeways to participate in this space. He is active in the blockchain community with speaking engagements, TV appearances and mentoring.James has over 15 years of experience in the Fintech industry.

Raoul Pal

Real Vision, Co-Founder & CEO

Raoul Pal is the Co-Founder and CEO of Real Vision, the world’s pre-eminent financial media platform, which helps members understand the complex world of finance, business, and the global economy. Real Vision members also have access to Real Vision Crypto, a cryptocurrency and digital assets video channelwatched by over 80,000 people.In addition, Raoul has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 31 years of experience in advising hedge funds and managing a global macro hedge fund. Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years. He retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands. Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences. Other stop-off points on the way were NatWest Markets and HSBC, although hebegan his career by training traders in technical analysis.

Peter McCormack

What Bitcoin Did, Journalist

Peter McCormack is a full timejournalist/podcaster covering topics such as Freedom, Human Rights, Censorship and Bitcoin. Peter created and hosts the What Bitcoin Did Podcast, a twice-weekly Bitcoin podcast where he interviews experts in the world of Bitcoin development, privacy, investment and adoption. Launched in November of 2017, the podcast has grown to over 100 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community. Expanding his growing list of humaninterest recordings, documentaries and films Peter has recently launched theDefiancepodcast andDefianceTV.
hello@whatbitcoindid.com

Caitlin Long

Avanti Financial Group, Founder & CEO

22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. In 2018-20 she led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 20 blockchain-enabling laws. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), heldsenior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997). She is a graduate of Harvard Law School (JD, 1994), the Kennedy School of Government (MPP, 1994) and the University of Wyoming (BA, 1990).
caitlin@avantibank.com

Hunter Horsley

Bitwise Asset Management, CEO

Hunter Horsley is Chief Executive Officer of Bitwise Asset Management. Prior to Bitwise, he was a product manager at Facebook, working on advertiser products including the multibillion-dollar sponsored content ecosystem and ad breaks in videos. Before Facebook, Horlsey was a product manager at Instagram, responsible for multiple advertising products generating several hundred million dollars of revenue. He is a graduate of the Wharton School at the University of Pennsylvania, with a B.S. in economics. Recently, Horsley was named a member of Forbes’ 2019 “30 Under 30” list.
hunter@bitwiseinvestments.com

Luke Gromen

Forest For The Trees, Founder & President

Luke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst.He is the founder and president of macro/thematic research firm FFTT, LLC, which he founded in early 2014 to address and leverage the opportunity he saw created by applying what clientsand former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America.FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients.Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14.At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”)for the firm’s clients.Prior to that,Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006.While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in whichhe aggregated and combined proprietary research from Midwest with inputs from other sources.Luke Gromen holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University.He earned the CFA designation in 2003.
Luke@fftt-llc.com

Meltem Demirors

CoinShares, Chief Strategy Officer

Meltem Demirors is Chief Strategy Officer of CoinShares, an investment firm that manages billions in assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem. Meltemoversees the firm’s managed strategies group and its New York office and leads corporate development. Previously, she was part of the founding team of Digital Currency Group. As a veteran investor in the digital currency space, she has invested in over 250 companies in the ecosystem. Meltem is passionate about education and advocacy, and teaches the Oxford Blockchain Strategy Programme and co-chairs the WEF Cryptocurrency Council.
md@coinshares.com