Tom Graff🔸

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Tom Graff🔸

Tom Graff🔸

@tdgraff

Chief Investment Officer @join_facet. Markets, Fed, macro. Hopefully informative, but no promises. Watch me on YouTube: https://t.co/7XLPzkU9SN

Baltimore, MD Katılım Mayıs 2011
556 Takip Edilen8.4K Takipçiler
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Tom Graff🔸
Tom Graff🔸@tdgraff·
They say that most amateur tennis matches are lost, not won. I.e., it isn't about hitting winners but about avoiding mistakes. Just keep returning the ball and it will work out. I think that's more true in investing than many of us want to admit.
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Tom Graff🔸
Tom Graff🔸@tdgraff·
@hsri07 The only way to get an actual "blow up" in the sense of permanent 30-40% losses is if there is WAY more widespread fraud than I think is reasonable. But to your point, EVEN IF that turns out to be true, there's nothing systemic about it.
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hsri07
hsri07@hsri07·
@tdgraff I have screamed this for a long time, my feed is chock full of doomers on Pvt credit. So let CCLFX & BCREd blow up - who cares except LPs, the GP & some rich dentists who got snookered into buying this crap by unscrupulous RIAs! 🤷‍♂️
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Tom Graff🔸
Tom Graff🔸@tdgraff·
To be clear, I don't think the Fed should hike just because oil prices are rising. If I were in the FOMC, I'd be inclined to cut 1-2 times later this year. However my level of doubt would be rising just a smidge. I'd want more data.
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Tom Graff🔸
Tom Graff🔸@tdgraff·
Similar to Waller's dovish turn last year, hard not to read this cynically. This is 100% a reasonable take. And maybe this is really what Waller thinks. But is it a coincidence that now that the Chair job is filled, Wallet sees things differently?
Nick Timiraos@NickTimiraos

Fed governor Chris Waller to CNBC's Steve Liesman: I was ready to dissent for a rate cut after the February jobs report came out. But the inflation picture is looking worse and has become more of a concern because the Strait of Hormuz is still closed, two weeks later. Moreover, there are reasons to think the breakeven payroll number could be very low. "My brain understands the math but I can't get through my gut that this is OK."

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Tom Graff🔸 retweetledi
vittorio
vittorio@IterIntellectus·
this is art
vittorio tweet media
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Bob Elliott
Bob Elliott@BobEUnlimited·
@HayekAndKeynes Even if the losses were 10x what we have seen loss wise in history (including the GFC) the systemwide losses are on par with 1 day standard deviation of the S&P500 to unlevered investors. x.com/BobEUnlimited/…
Bob Elliott@BobEUnlimited

Before there was private credit there was C&I lending. Even if PC losses were 10x ever seen in all of history, it would still be irrelevant from a macro perspective. x.com/BobEUnlimited/…

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The Long View
The Long View@HayekAndKeynes·
Let’s do some basic math 8% default rate (extremely high) 25% recovery (extremely low) 6% credit losses Avg coupon is Cash+ ~5% Slightly less than cash, a bit worse with management fees/expenses (no carry) in this scenario This is not the end of the world. Someone want to run this for PE if we get large losses and multiple compression and weak/negative earnings growth 😏
kristen shaughnessy@kshaughnessy2

“Private Credit Default Rates to Reach 8%, Morgan Stanley Says” “…While AI disruption has yet to impact private credit fundamentals in a “material way,” elevated leverage and looming maturity walls within the software sector may push default rates near peak levels unseen since the pandemic, a team of analysts including Joyce Jiang said in a Monday note. “Credit fundamentals of software loans are challenged with the highest leverage and the lowest coverage ratios across major sectors,” the strategists wrote. While defaults have moderated across public and private loan markets, they added, defaults are only set to climb further as AI disruption unfolds….” bloomberg.com/news/articles/…

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Tom Graff🔸
Tom Graff🔸@tdgraff·
I think this is the most prophetic line in movie history.
GIF
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Om Patel
Om Patel@om_patel5·
stop spending money on Claude Code. Chipotle's support bot is free:
Om Patel tweet media
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Tom Graff🔸
Tom Graff🔸@tdgraff·
@tor31890388 This is absolutely right. I get it that a lot of people don't know all of this history or the nuances of different kinds of lending. Asking tough questions is fair. It pisses me off when people who *definitely* know better spread this BS.
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The Lime Painter
The Lime Painter@tor31890388·
@tdgraff Yes plus correlations are not as high. Even if concentration in software can be 20%. We are talking about may different businesses. In 08 was ALL housing subprime. ALL. CLOs BBBs were NEVER touched even in 08. And that’s the reason correlation!!!!
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SuburbanBourbon
SuburbanBourbon@SuburbanBourbo2·
@tdgraff but other forms of pc than just BDCs and those seem to have multiple layers of leverage
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Tom Graff🔸
Tom Graff🔸@tdgraff·
@AyyouEm @OperatingIntern See NOW you are talking about where the real problem lies. In that case the loan definitely shouldn't be marked at par, and it seems a lot of these are. But still, that's not analogous to the leverage on leverage of a CDO^2.
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JV
JV@AyyouEm·
@tdgraff @OperatingIntern Consider 1mm of ev based on sponsors marks where real clearing price would be like 300k?
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Tom Graff🔸
Tom Graff🔸@tdgraff·
@ChrisWallis12 @MKTWgoldstein Time will tell. I'm skeptical there's a major credit cycle here without a recession (outside of software). I.e., I don't buy that losses in private credit cause a slowdown. It would be the other way around IMO.
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Chris Wallis
Chris Wallis@ChrisWallis12·
The issue is less the size of credit losses as the market can always absorb those over time. The issue is the halt of liquidity flows, due to opacity. We are going to discover to what degree retail flows that replaced institutional flows the last twenty four months were propping up equity/credit marks. The ability to roll financing and fund growth is more important than imbedded losses that are allocated across time and multiple holders. I am not implying this is the GFC 2.0, its just a credit cycle. We have liquidity backstops at central banks so that we can actually absorb the losses across time and reallocate capital. All good things.
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Tom Graff🔸
Tom Graff🔸@tdgraff·
@ChrisWallis12 @MKTWgoldstein I think you've leapt to a lot of conclusions here TBH. Middle-market CLOs are ~5% of the CLO market? Maybe? And if you are claiming the insurers have leverage on leverage, then they'd have to own the equity tranche. Maybe that's happening out there? But is it large?
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Chris Wallis
Chris Wallis@ChrisWallis12·
Start looking into the captive Bermuda insurers where PE managers have been selling private credit and the insurers are repackaging into CLO’s and selling throughout the financial system. That’s where the real leverage is likely sitting. The other element that rhymes will be wholesale funding if double pledging of collateral turns out to be a material issue. It will mimic the issues with auction rate preferreds. We are still in the discovery phase of the depth, breadth, severity of the credit issues. Flows in private credit from retail has been funding PIK terms and refinancing zombie companies. Those flows have stopped we will see an acceleration in credit marks and that is a good thing.
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Tom Graff🔸
Tom Graff🔸@tdgraff·
@MutaliskGluon Obviously there have been the 3 big cases of fraud like you described. I'm sure that isn't the last we'll hear of that. But I don't think we're going to find that 10% of private credit is fraudulent.
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🥊♟️Leon Kramer♟️ 🥊
🥊♟️Leon Kramer♟️ 🥊@MutaliskGluon·
@tdgraff I think a big issue well find out this cycle is collateral being used multiple times for different loans or not being marked properly. Won't be the same as the leverage in 08 but will have similar margin call and co tagion impacts
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Keşfet

@hsri07 @HayekAndKeynes @JarrottHeath @lebas_janney @tor31890388 @AyyouEm @OperatingIntern @SuburbanBourbo2