April 13, 2020 - 3:37pm EST by
2020 2021
Price: 164.00 EPS 1 1
Shares Out. (in M): 1 P/E 1 1
Market Cap (in $M): 1 P/FCF 1 1
Net Debt (in $M): 1 EBIT 1 1
TEV (in $M): 1 TEV/EBIT 1 1
Borrow Cost: General Collateral

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  • stop putting zero effort into writeups and then complaining


I am posting this here because I would like someone to disprove my idea / pushback on it.


Simply put the idea is as follows:

The federal reserve has done arguably the most herculean monetary stimulus in American history - they have said essentially that the fed is going to backstop all corporate credit, all muni credit, and to a large extent all SMB credit.


There must be some credit consequences to massively levering up during a downturn in earnings - the US government is doubling its debt, while earnigns are down 30+%, perhaps more - GDP will be down 30+% this quarter, and tax receipts who knows how bad those will be or if we even have a tax holiday this year


The old school credit methodology is you have your sovereign risk as it's the risk free asset in a given country, and then tack on a credit spread for a corporation, a municipality, or a pizza shop what have you.


Right now, the trade the fed is doing is buying all credit assets - so it seems quite likely that the spread between treasuries and corproates should massively collapse overall - essentially the fed has decided we're all in this together - so doesn't matter if you are a high yield casino, an IG health care company with a rock solid balance sheet, or Mama's Pizza & Pasta, we're all all for one and one for all.


At the same time, the federal deficit is going to double, while the "earnings" that support that leverage are down massively.


So I think the positive carry trade is to be long all credit assets and short US treasuries - this can be accomplished through many ways - a simple equity driven approach would be logn HYG, short TLT, but there are other smarter ways to put it on I'm sure

I hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


father time is undefeated

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