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Your Quiver | Monday, May 15, 2023

CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.

Captain Credit Crunch

If you’re wondering when we’re going to start to see the credit crunch, it’s here now. Vice Media filed for bankruptcy. KKR’s Envision Healthcare did too. Alongside home security company Monitronics, chem producer Venator Materials, oil producer Cox, and others. It’s hard to renegotiate debt that you put on (in droves) when financing was near free.

Behind the Scenes

It sounds like discussions about the debt ceiling do better when the top guys are out of the room. Biden and McCarthy postponed their prior Friday meeting until tomorrow (Tuesday) because staffers were making progress, including over the weekend. But we have seen this before. Don’t get too excited until there is an agreement.

Bostic's Straight-Talk


Non-voting Fed member and Atlanta Fed Prez Bostic came out against current investor positioning. He said that the Fed won’t cut rates in 2023, and the Fed may need to hike more if inflation doesn’t cool. On that note, Friday’s May U of Michigan Consumer Confidence release pointed to consumers highly concerned about inflation, and Powell has cited this survey as a key variable in the Fed’s reaction function.

Factoids

Short positions in S&P futures increased by 21k contracts and is now the largest in over 12.5 years, per BBG. WSJ is noting that allocation to stocks versus bonds is at the lowest level since 2009. But should we really read into that last one? Is that a statement about equities, or more about attractive bond yields?

PIPEs are Back


No, not bagpipes. Remember those (Private investments in public equity companies)? Well, volatile markets, a retracting banking sector, and ongoing cash needs are fueling their return. PIPEs give flexibilities to the parties, as well as more confidentiality.

Clever CME

CME is threatening to leave Chicago if the city does something “ill-conceived.” With crime up, a new mayor, and companies leaving downtown, the city has to stem the tide. But CME has a true BATNA. In their leases, they have a clause saying that if the city or state does something non-biz-friendly, the leases are null and void. They sold their real estate, so it makes their threat a lot more credible.

Gold in Them Hills


Gold giant Newmont $NEM is buying Newcrest for $17.8bn. It is a huge consolidation play in the mining sector, specifically in the gold and copper industries.

Zero is Zero


Asset manager GAM cut its bonus pool to $0, aside from contractual bonuses that it must pay out. It’s trying to reduce costs as it sells itself to Liontrust. It’s a great way for talent to flee, but maybe that’s the plan—so that the new management doesn’t have to cut folks. They already cut headcount to 541 people from 701 at Dec 2020, but with income down -27% in 2022, perhaps that is not enough. Brutal for those who stuck it out without a contract.

A Big Macro Week

Tues: US retail sales, industrial production, business inventories

Wednesday: Japan GDP, EZ CPI, US housing starts

Thursday: US initial jobless claims, Conference Board Leading Index, existing home sales

Friday: Japan CPI