Van Hesser's 3 Things in Credit - A KBRA Podcast: Recent Episodes
Kroll Bond Rating Agency
Each week, KBRA's Chief Strategist, Van Hesser will address three things that caught his attention in credit markets that are relevant to credit investors.
This week, our 3 Things are:
- Regional banks. How irrational is the selling pressure?
- Bank exposure to commercial real estate. It is often overstated and misunderstood.
- Homebuilders. Cyclical or growth story?
This week, our 3 Things are:
1.Cost of capital. What does its rise mean for credit?
2.U.S. consumers. Will they continue to spend?
3.Strong demand for credit. Why is it happening at this point of the credit cycle?
This week, our 3 Things are:
1. Inflection point. We are at one, we’ll tell you which way we’re headed.
2.Big bank color. What are the largest lenders seeing?
3.Ed Altman weighs in. He’s worried about one thing. We’ll clue you in.
This week, our 3 Things are:
1.CarMax and Albertsons. What do they say about consumer sentiment?
2.Credit crunch. While we wait for the SLOOS, here’s an early look.
3.Recession probabilities. Can 100% equal 35%?
This week, our 3 Things are:
1.Community and regional bank business model. We examine it.
2.Bad news rising. Is this now a trend?
3.Banking crisis. Jamie Dimon says it’s not over. We’ll have a look.
This week, our 3 Things are:
1.Market sentiment. It’s fluid.
2.Earnings season is back. What will the banks say?
3.Chinese growth. It’s positive … right?
This week, our 3 Things are:
1.Protecting bank depositors. We think that’s happening ...
2.Uncertainty. It’s back and it’s unwelcome.
3.AT1s. Is this the end of a market?
This week, our 3 Things are:
- The glass is suddenly half empty. We’ll walk you through what’s changed.
2.Consumer spending. How long can it continue?
3.Silver linings. John McEnroe might say, “You can’t be serious!” But they’re there.
This week, our 3 Things are:
1.Long and variable lags. Are markets priced for them?
2.Event risk. How should we view it in this environment?
3.High yield. Is there value at this point?
This week, our 3 Things are:
- Private credit. What's behind the growth?
- Consumer expectations. Just how meaningful are they?
- Housing. The latest in this all-important leading indicator.
This week, our 3 Things are:
1. Walmart earnings. Its forward guidance is not the stuff of no landing.
2.Larry Summers. How to avoid a Wile E. Coyote moment.
3.Affordable energy. Remember what comes down can go up.
This week, our 3 Things are:
1.Corporate margins. They’re falling. Should we worry?
2.Earnings growth. It’s falling. What does this signal?
3.Consumer wealth. It is constructive overall, but not for everyone.
This week, our 3 Things are:
1.Where is the recession? The answer lies in the uniqueness of this cycle.
2.Lender sentiment. Banks and markets have diverged.
3.Stability. It has returned to risk markets.
This week, our 3 Things are:
- The Fed. Something for everyone.
2.China. More thoughts on its impact on credit.
3.Market tone. It's better, for now.
This week, our 3 Things are:
1.Hard data confirming slowdown. It’s here.
2.Earnings recession. It’s not good for credit, but magnitude matters.
3.Market-implied recession models. They can be misleading.
This week, our 3 Things are:
- Deterioration. When will it show up?
2.Unemployment. When (and where) will it show up?
3.Big bank results. We’ll summarize what the biggest players in credit are seeing.
This week, our 3 Things are:
- A softer landing. How possible is it?
2.Corporate margins. Contracting, yes, but how meaningfully to credit?
3.Services demand. The latest data says it’s falling—what this means for spreads.
This week, our 3 Things are:
- A new credit paradigm. It’s here and it’s different.
2.China’s reopening. That’s good, right? Maybe…
3.Labor market. What’s good for consumer finance might not be good for economic growth. We’ll explain.
This week, our 3 Things are:
- Growth concerns. Inflation concerns are so 2022.
2.Bank valuations. What those say about this cycle.
3.Treasury volatility. It should settle down.
This week, our 3 Things are:
- KBRA’s European Securitization Survey. Fresh insight into investor sentiment.
2.Credit’s canary in the coal mine. A Bloomberg survey shows what investors are watching.
3.Consumer borrowing. It’s rising sharply. It fits the Fed’s narrative.
This week, our 3 Things are:
- Credit spreads. Why aren’t they wider?
2.Catalysts. We’ll explore those to the upside and those to the downside.
3.Economic indicators. We’ll walk through those worth paying attention to.
This week, our 3 Things are:
- Pain. It continues to guide the Fed.
2.Walmart and Target. Extraordinary earnings releases provide updated color on the health of the U.S. consumer.
3.Retail sales. Better than expected, but not helpful to the cause.
This week, our 3 Things are:
1.A cool CPI print. It is but one data point, but it suggests inflation is coming under control.
2.Avoiding recession. It’s not our base case, but two highly credible voices lay out how it could happen.
3.Debt ceiling. It’s back on the radar, and it’s the thing no one wants to talk about.
This week, our 3 Things are:
1.Powell-speak. We don’t think the message changed all that much, but markets struggled with it. We’ll reiterate our view.
2.Caterpillar’s earnings. Remarkable, and important context for investors.
3.Operating margins. It’s an important marker to track.
This week, our 3 Things are:
1.Peak pessimism. Are we there yet?
2.Housing. It’s all over the news again. Here’s what you need to know.
3.The New York Fed’s Underlying Inflation Gauge. It’s a CPI alternative. Is the Fed watching?
This week, our 3 Things are:
1.Insight from Allianz. A CEO worth paying attention to.
2.Recession contours. It’s coming, and it’s becoming clearer what these look like.
3.Bank of America’s look at U.S. consumers. It’s reassuring but not surprising that they continue to exhibit strength.
This week, our 3 Things are:
- CEO outlooks. Two new surveys offer interesting insights into what we’re facing.
2.ISM Manufacturing PMI. What the latest reading says about inflation.
3.GM’s surge in auto sales. You heard that right. We’ll have a look.
This week, our 3 Things are:
1.Wealth effect. It’s real, and it’s been a big part of the consumer’s willingness to spend. Now, it’s falling.
2.The default cycle. We’ll dimension what this upcoming one looks like.
3.Volatility and financial stability.
This week, our 3 Things are:
- Corporate earnings. A spate of Q3 warnings are out, but FedEx’s really makes us think.
- Federal Reserve tightening. The central bank’s new and more realistic projections are an affront to risk.
- The price of credit. With what we’re facing, does current pricing makes sense?
This week, our 3 Things are:
- The hot CPI print. We have an alternative narrative.
2.The U.S. consumer. Two heavyweights weigh in with differing takes. We’ll share our view.
3.Investor risk appetite. Fresh reads on where it’s headed.
This week, our 3 Things are:
- Credit crunch. How real is it?
2.Growth slowdown. Tightening is starting to bite.
3.Corporate earnings. Estimates have to come down, but what is the risk to credit?
This week, our 3 Things are:
- Q4 outlook. History tells us to expect volatility. We’ll lay out important parameters.
- Price of gas. Its ability to move sentiment is too important to downplay.
- Earnings conference calls. An important new academic work says credit investors don’t pay close enough attention to credit signals embedded in those calls. We’ll interview one of the authors.
This week, our 3 Things are:
- Where did the recession go? Here’s a clue—it continues to lurk in the shadows.
- Falling energy prices. Be careful what you wish for.
- Goods versus services. The mix in the economy does not bode well for corporate earnings.
This week, our 3 Things are:
- Supply constraints. What’s happening with the other part of the inflation story?
- Recession timing. We’ll share our view.
- Credit versus stocks. By one measure, credit hasn’t looked this good since 2010.
This week, our 3 Things are:
-
The Fed’s pivot. Are we really there?
-
A bounce in the price of risk assets. Real, or a dead cat bounce?
-
2023 corporate earnings. What do those estimates tell us about today?
This week, our 3 Things are:
-
Uncertainty. It’s there, but it’s not as bad as you might think.
-
Liquidity. The lack of liquidity clearly affects credit—but it also affects inflation.
-
CLOs. They have been a laggard in terms of returning to normal.
This week, our 3 Things are:
- Disintermediation of banks from riskier lending. It’s a positive development for credit markets.
- The importance of the forward look. Be careful about relying on backward-looking indicators.
- A good week for spreads. Will it hold up?
This week, our 3 Things are:
- Inflation and credit. This week’s hot CPI and PPI prints increase the likelihood of a harder landing in credit.
- “Worst ever” sentiment surveys. We’ll provide some perspective.
- Earnings in a recessionary and rising rate environment. We’ll help you define those dimensions.
This week, our 3 Things are:
1. Corporate earnings. Growth should slow, but remain good enough for credit.
-
KBRA Altman Default Forecast. Our latest reading has jumped significantly.
-
Lack of Economic Excesses. That points to a shorter and shallower downturn.
This week, our 3 Things are:
1. Commodity price plunge. The narrative around much-discussed supply is shifting.
2. Consumer staples. After a period of heightened event risk, the sector’s defensive nature is conveniently returning.
3. Texas Manufacturing Outlook Survey. Activity in the Lone Star State has fallen dramatically.
This week, our 3 Things are:
1. An oil spike. It often triggers central bank tightening.
2. Sentiment surveys. See if you can find some optimism; we can’t.
3. Bank stress tests. The outcome can be the difference between a mild and a more severe recession.
This week, our 3 Things are:
1. Inflation. It continues to bedevil markets.
2. Fed forecasts. Here’s a perspective on the labor piece.
3. Uncertainty leads to volatility. We’ll weigh the bull and bear cases.
This week, our 3 Things are:
1. The energy spike. It’s likely to get worse.
2. Equity valuations are still high. Why do we care?
3. The redevelopment of JFK Airport. A unique public-private partnership.
This week, our 3 Things are:
1. Growth shock. It’s the new inflation.
2. ISM Manufacturing stops its skid. We have a non-consensus view.
3. Consumer spending. BofA and Amex give fresh perspectives.
This week, our 3 Things are:
1. Uncertainty. We’ve got more now than we’ve had for some time. Two market heavyweights give us updated perspectives.
2. Tightening. The Fed’s jawboning has been effective.
3. Rising distress. Recent movements confirm an up-in-quality view.
This week, our 3 Things are:
1. Retail. How do you square retail sales with Walmart and Target earnings releases?
2. Inflation expectations. We came across a new measure that shows quite divergent views across the world.
3. What’s ahead? Markets corrected at a furious pace—now what?
This week, our 3 Things are:
1. The correction. Markets have reset—now what?
2. The Fed’s Financial Stability Report is out. It’s really not so bad.
3. The fall in cryptocurrencies. Here’s how it affects credit.
This week, our 3 Things are:
1. Bonds are back. It’s been painful, but entry points make sense again.
2. Labor markets in focus. There’s more here than just a low unemployment rate.
3. Fed tightening cycles. Our research shows a different narrative.
This week, our 3 Things are:
- Freight movements. Those fixated on sticky high inflation should pay attention.
- Housing markets. There are many sides to this all-important economic sector.
- Margin update. How successful have companies been in passing along higher costs?
In this week's episode:
- Our KBRA Altman default forecast. We’ll dig into the model’s outcome.
- A potential energy spike. The single biggest risk we see to credit markets.
- JPMorgan Chase’s loan loss reserve build. Should we worry?
In this week's episode:
- Security. A new world order demands it, and it touches several sectors in credit markets.
- Sinking surveys. Watch what they do, not what they say is being tested.
- Corporate pricing power. Watch out for consumers voting with their feet.
In this week's episode:
- Recession risk. It’s rising. We lay out a timetable.
- Homebuilder blues. How is this possible amid a chronic house shortage?
- Jamie Dimon’s letter. There’s always a lot to unpack.
In this week's episode:
- Earnings are normalizing. That means weakening. We’ll explore what that means for credit.
- Moving to late cycle. So why are spreads tightening?
- Yield curve inversion. Does it really matter?
In this week's episode:
- Extreme volatility. We cannot rule out contagion just yet.
- New issue supply. Against a rash of unfavorable forces impacting corporate credit performance in 2022, this could be a bright spot.
- Fed confusion. We’re not sure the messaging squares up with what we’re seeing.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Small business. This all-important economic engine is sputtering. We’ll explore.
- Earnings durability. Estimates remain at a cyclical peak. Does that make sense?
- Places to hide. Some sectors are built better for this kind of environment. We’ll name names.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Geopolitical shocks and credit. At what point do geopolitical events impact markets?
- China. Can it play a positive role in the Russia-Ukraine conflict?
- Russia facing another possible default. What’s the risk of contagion?
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Russia. While Russia and Ukraine represent less than 2% of the global economy, Russia’s invasion will play a key role in an emerging new world order.
- Normalization and the risks to credit. We’ve written an extensive piece about what that means. We’ll give you the highlights.
- Falling cyclicals. That doesn’t square up with macro views of economic growth prospects. We’ll explore.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Equity volatility. It does bleed into credit spreads. Keep an eye on it.
- A bank examiner’s view of credit risk. It doesn’t quite square up with what we hear from the banks.
- Supply chains. Here’s an easy way to mark their progress in opening up.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Inflation fears. It’s become a national obsession. Our thoughts on what it means for credit markets.
- Consumer debt jumps higher. A sign of confidence or stress? We’ll explore.
- Recession risk. One respected reading suggests there is a 50% likelihood for a recession within the next 12 months. We’ll clue you in.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Slowing growth. Q4’s extraordinary GDP print feels like ancient history. Best to prepare for what’s ahead.
- The ISM manufacturing index. This indicator has proven to be a useful guide to where credit spreads are headed.
- Larry Fink’s annual letter to CEOs. Here’s what his 2022 message means for creditors.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Jerome Powell’s even more hawkish pivot. A more aggressive tightening stance introduces additional risk into our outlook.
- Stocks versus bonds. Why has credit held in relatively well compared to equities’ powerful sell-off? We’ll explore.
- The all-important U.S. consumer. We’ll canvas three big consumer lenders’ Q4 results for insights into just how durable the consumer is.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Big bank earnings. All of the attention was directed at expense growth, which ignores a remarkable development that is far more important to creditors.
- Recession risk. It’s back on our radar, and history tells us it needs to be on yours.
- The energy transition. Spiking oil prices are one sign that this is not likely to be a smooth one.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Turning inward. The world’s two economic superpowers, the U.S. and China, have their respective plates full of domestic issues that threaten to slow global growth.
- Wide margins. Corporate pricing power, which is contributing to the highest inflation in 40 years, has boosted margins.
- The credit cycle. Some say we’re mid-cycle and others say late. We’ll have a look.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Risks. There is no shortage of things on this list, but we’ll highlight the ones that we are paying close attention to.
- The jobs report. Our focal point remains more on growth in the labor force and less on the unemployment rate.
- Supply chains are broken and driving the inflation narrative, right? The latest data shows the predictable correction is happening.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Linear thinkers. The crowd that believes the recovery will be a straight line based on past experience runs the risk of pushing the Fed into a recession-producing policy error. We’ll explain.
- Geopolitical hot spots. As the Biden administration focuses internally on navigating America’s toxic politics, the likelihood of flare-ups increases. We’ll tell you what we’re watching.
- Corporate earnings are forecast to rise 9% year-over-year in 2022. Is the backdrop to getting there as benign as it needs to be?
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The leveraged loan market saw deals pulled this week, prompting some market heavyweights to wonder if this is the start of something bigger. We’ll weigh in.
2. China has become a remarkably fluid story influencing credit markets. Here’s what to watch in 2022.
3. Small to midsize business indicators are flashing yellow. Don’t lose sight of what is happening in this sector that is so important to economic growth.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Omicron. We’ve sifted through all the noise to come up with useful perspective to creditors.
2. Nordstrom’s big earnings miss. What’s the correlation to the retailing sector?
3. One measure of investor sentiment has swung wildly in the past week. We’ll walk you through the equities-versus-credit story.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The fading away of COVID, at least in terms of its ability to disrupt. New developments on the therapeutic front might just make that statement true.
2. Retailers had a really strong week. Is the retail apocalypse over?
3. Raging inflation means margin pressure, right? Not so fast—we’ll check Q3 earnings to see where we stand.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Inflation. It’s back, but will it stay? Here is some much-needed perspective.
2. General Electric’s cautionary tale. Did investors overweight the benefits of diversification?
3. The Fed’s semiannual report on risks to the financial system is out, and it’s fairly benign. Should we be worried?
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The spike in home values. We remain comfortable with the risks to markets and the broader economy, and there are opportunities emerging in what could be a housing “super-cycle.”
2. Where did all of the savings go? Apparently, it’s been spent, taking away one oft-discussed engine of future spending growth.
3. Government bond market volatility. Should we care?
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Uncertainty reigns. The common thread running through our recent webinar was one of uncertainty—something underweighted in credit markets today.
2. General Electric (GE) is making progress in its restructuring, and its commitment to deleveraging is sensible. But a challenging environment is not making GE’s transition an easy one.
3. Consumer malaise—it’s a corrosive condition that is showing up more and more in the Great Deceleration.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Thematic investing seems to be trumping fundamentals in credit. That doesn’t sound like an investing strategy—but in this market, with this level of exogenous influence, it might make sense.
2. Big bank earnings once again reassured markets that all is not only well, but extraordinarily so. We canvas the conference calls for insightful color.
3. COVID’s impact on globalization and supply chains—how real is the threat? We’ll examine the issue.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The rise in energy prices is spooking politicians and investors. What does it mean for credit? We’ll set the context.
2. As we enter Q3 earnings season, all eyes are on corporate margins. Powering through the multitude of headwinds is a tall order.
3. Europe’s political winds are shifting in ways that are reducing euro area credit risk. We’ll talk to KBRA’s Europe-based sovereign analyst for his take.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The jobs market is tight, but not strong, and on Jobs Friday it’s important not to equate the two. We’ll explain.
2. Some investors believe corporate credit risk has been structurally improved. We’ll examine the argument.
3. Where did all the growth go? Economic growth forecasts for Q3 have plummeted. Does that come as a surprise to you?
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. With the reality of the Great Deceleration settling in, we canvas Wall Street to see what risks could turn market sentiment.
2. Economic growth is being cut in half, but corporate earnings are expected to grow at double-digit rates? We’ll take the under.
3. Consumer ABS performance offers great insight into the health of the U.S. consumer. We’ll talk to our head of ABS research for his insights.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Evergrande—no, this is not China’s Lehman moment, but it does speak to what is happening with the world’s second-largest economy, and that’s important to credit investors. We’ll elaborate.
- Stretched valuations—just how worrisome are they? We think it’s debatable, and we’ll lay out our case.
- The Fed speaks! While the world is focused on dot plots, we focused on its projections, and had a hard time connecting those dots.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Gap’s sensible liability and cash management through the COVID period has put it on a more creditworthy path.
2. A historic percentage of Americans believe the country is in bad shape. How does that square with buoyant financial markets?
3. Fading inflation—this was a good week for those in the transitory camp and that’s good for risk assets.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Here comes what could be a 10% hit to corporate earnings—it’s higher taxes, if Biden gets his way.
2. Credit deterioration in the “buy now, pay later” space could be a canary in the coal mine for consumer lenders. We’ll explain.
3. The delta variant is causing travel to fall off once again. But don’t think the travel, leisure, and hospitality sectors will be out of the woods post-COVID.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- CLOs are now a $1 trillion market (and growing). A report out of the New York Fed points to a healthy maturation of its investor base. We’ll elaborate.
- Afghanistan. Markets have looked past this story until now. We feel a gravitational pull toward safer assets.
- Capex, expected to rise materially in 2021, has come in a bit soft lately, and not all firms and sectors are participating. Pay attention to those that do.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- Squaring up deteriorating economic growth with stretched valuations.
- China’s fluid policy-driven initiatives are creating a headwind for the global economy.
- In search of “TINA Turners.” No, not that Tina Turner. We’re looking for things that will change the course of TINA investing, as in There Is No Alternative.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The housing market is moving from superhot to warm. It’s a good proxy for what’s ahead for the broader economy.
2. Small business optimism has taken a turn for the worse. We’ll explore what’s behind it, and why this matters.
3. The Democrats’ plan to tie Biden’s $3.5 trillion “human infrastructure” bill to the $1 trillion traditional infrastructure bill risks more than just the $1 trillion bill. We’ll explain.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- In search of economic normality. We know this isn’t it, but it’s coming.
- The Fed is guiding its path toward tightening seemingly every day. Our thoughts around what happens to credit, when it gets there.
- Corporate earnings are forecast to continue to grow off of today’s stimulus-fueled results. We would be a bit more cautious about that outlook.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- The UK vs. COVID—Its spike in new cases, and subsequent fall, could serve as a harbinger of what’s to come in the U.S. But there is an important difference between the two countries. You’ll want to stay on top of this story.
- The upcoming July jobs report might be the most inconsequential one of the pandemic era. We’ll tell you why.
- Boeing and GE—Two industrial mainstays undergoing what their respective management teams call “transformations.” We’ll check in.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The spread of the delta variant is keeping the pandemic on the radar of investors, and contrary to some, we believe it is impacting economic behavior.
2. A number of useful proxies for economic growth have rolled over. It’s worth considering as you think through the second half.
3. The Fed says the real unemployment rate is 8.7%. There remains considerable slack in the labor market.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Margin pressure. The Producer Price Index confirmed this week what we all know—strong demand and supply chain bottlenecks are causing price pressure that figures to hit corporate margins. We think this is largely a story shareholders have to worry about.
2. ESG favorable bonds are on track to cross $1 trillion this year. The momentum, and the change that goes with it, is palpable.
3. Big bank earnings are out, as is their color on the credit environment. Their barely contained optimism reflects an environment that soon will fade.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The rally in rates. It seems to have caught just about everyone off guard. We’ll explore what it means for credit markets.
2. The pandemic has not gone away. The most lethal side of it has been contained for now, but it still is likely to act as a drag on the global economy.
3. Where did all the defaults go? We’ll take stock of this extraordinary environment.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
-
The consumer has remained a source of economic strength throughout the pandemic, thanks to the strong hand of the federal government. Ahead of the jobs report, we take stock of the consumer’s financial health.
-
The U.S. is in the midst of a productivity boom, something enhanced, ironically by the pandemic. Will it last?
-
We really didn’t need a dot plot to appreciate the divergent views coming out of the Fed regarding the threat of inflation. Our chief sovereign analyst thinks this might be orchestrated. It’s an interesting perspective.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The Great Deceleration. It’s coming. Have we all gotten dangerously use to a life on stimulus? That’s going to change, and it probably won’t be elegant.
2. Your tax dollars are at work. This week, your federal government has been active in ways that touch credit markets. We’ll share our thoughts.
3. Broadband is taking off. We’ll highlight a transaction that gets you exposure.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
- One of the consumer lending business’ most insightful minds is warning that losses have been deferred through the pandemic and credit underwriting models need to discount the pandemic era loss experience.
- The West is experiencing its worst drought in at least 20 years, something likely to hit exposed sectors over the course of the summer.
- A far greater percentage of companies are in financial and/or operational distress than you might realize, and having quarterly economic growth go from 10% to 3% over the next year is not likely to help.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The markets’ obsession with inflation continues unabated. We’ve gathered three distinctly different views from three high-profile sources along with our own and will let you decide where you stand.
2. The NFIB’s Small Business Optimism Index is out for the month of May is out, and the expectations component surprised us.
3. Dust off your LBO models! These credit-impairing transactions are back, with the largest deal announced since the GFC, a $34 bn management buyout for privately held Medline. While LBOs are never good for creditors, event risk just might not be as bad in this cycle. We’ll explain.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The press is reporting that the Fed will begin to unwind its corporate bond investments made to stabilize credit markets in the early days of the pandemic. Is this a taper tantrum corporate-style?
2. Credit markets are normalizing—what does that mean for supply and spreads?
3. KBRA has published its financial strength rating report on Lloyd’s of London. It’s worth a look.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. Navigating uncharted economic waters requires data, but the data is noisy. Don’t lose sight of what’s happening with consumer confidence—it’s been fairly insightful in framing out the economic recovery.
2. The technology sector gets nicked by creditors from a business risk standpoint. Big tech needs to be reclassified. We’ll explain.
3. The NAIC’s adoption of private rating letter rationale reports is a sensible outcome without hindering the U.S. private placement market.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. It surprised us to find that bankers remain cautious in terms of their lending. We’ll investigate.
2. Citi’s Economic Surprise Index just hit the lowest point since June 2020, something hardly consistent with fears of overheating
3. Solar is on a tear! We’ll check in with KBRA’s Head of Consumer ABS to explain what you need to know about investing in solar from a creditor’s perspective.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
- Amazon just issued $18.5 bn in debt and the biggest question is why. The answer is actually quite straightforward.
- Inflation—the noise around this continues to build. We’ll frame out the issue for you.
- The Fed just released its semiannual Financial Stability Report. It’s a good news/bad news story that you should know about.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
1. COVID-19 has altered how we need to look at the credit cycle in the future. We’ll tell you how.
2. If you don’t think Bitcoin is relevant to credit markets, you’ll want to pay attention to something we discovered this week.
3. One credit asset class taking off is investment funds issuing bonds. We’ll talk to an active participant in the space to explain why.
In this week's episode, KBRA Chief Strategist Van Hesser discusses:
1. The era of big government is back! This actually has a big impact on default rates. We’ll tell you how.
2. We’ve updated our key themes in credit. Unlike the Fed’s statement, you won’t need to perform forensic analysis on our key takeaways.
3. In this historically low-yielding environment, investors are increasingly getting out of their comfort zone in search of yield. We’ll tell you where.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
1. Economic Slack—Our index of the U-6 underemployment rate and excess industrial capacity tells us that there is plenty of slack in the economy, giving comfort that inflation fears are overblown.
2. Big Bank Earnings—Our economic canaries in the coal mine. Q1 earnings’ actions and commentary suggest nearly all is well in commercial and consumer loan risk.
3. Consumer Confidence—The latest report from the University of Michigan reminds us that the pandemic and rising cost of living are weighing on the U.S. consumer.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
- The Johnson & Johnson vaccine pause is yet another data point that suggests that pandemic risk is not yet in the rearview mirror
- The economic boom is coming—retail sales’ blowout, the latest high-frequency data gathered by the New York Fed, and the big drop in jobless claims suggest the boom is here, and
- The rise in commodities prices is being felt by manufacturers the world over as the reopening takes root; Materials producers are the beneficiary, and strong earnings growth is likely
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
1. BP is but the latest multinational that is attempting to change its stripes to become more bondholder-friendly.
2. The ISM’s latest PMI releases for both manufacturing and services are pointing to a recovery that is looking like it might be a bit unruly, and
3. Jamie Dimon’s letter to shareholders is an upbeat near-term view, but a rather sobering one taking stock of America’s future.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
1. The failure of Archegos and its ripple effects through risk markets. We’ll tell you what is worth worrying about…and what is not.
2. Economically, the “calm before the surge” is transitioning to just the surge—fasten your seatbelts, it’s going to be quite a ride.
3. The economic fortunes of the US and Europe are diverging. Will it last?
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
1. The Fed has joined other prognosticators in materially improving its U.S. economic forecast. Peel off the stimulus effect and prepare to be underwhelmed
2. China’s influence on the global economy, and credit markets, is multi-faceted and it continues to grow
3. KBRA Altman, a division of KBRA Analytics, has released a one-year forward, Corporate Default Forecasting Model, and our initial outcome is yet another remarkable datapoint in the COVID-19 saga
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
- The cost of just about everything manufacturers need is jumping as the economy roars back to life. Beware of margin compression over the next couple of quarters.
- The CEO of General Electric “turned the lights out” on GE Capital this week. There are important lessons learned from this saga, we’ll elaborate.
- The American Rescue Plan is here. We’ll sort through the hype and tell you what it means for creditors.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses:
• Citadel is the latest nonbank financial to access the investment-grade capital markets.
• The pandemic has pushed what was the investor’s single largest concern—rising geopolitical risk—to the back seat. It’s rising again. Don’t lose sight of it.
• Few in markets seem to be worried about the health crisis going sideways. Two experts think you should. We’ll tell you what they have to say.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses: The noise around rising rates has become deafening, but the credit story remains sound; The loan market has proven to be a port in the rising rate storm; The Fed acknowledges excesses and vulnerabilities in the financial system, away from banks.
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses: Remarkably solid corporate earnings performance in the U.S.; Don’t lose sight of labor market headwinds in the recovery story; Market structure for corporate lending has changed, and it’s bondholder-friendly (at least through the pandemic period)
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses: • U.S. High Yield is anything but—it’s worth checking out High Yield in Asia • In adopting a “New Operating Model,” Kraft Heinz is deleveraging with shareholder support • BlackRock’s latest annual letter to CEOs further drives home the importance of ESG-friendly corporate behavior
In this week's episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser discusses: • The Jobs report: Beyond the headline numbers, the quality of the labor market is telling a different story • Energy on the rebound: Energy has gotten caught up in the reflation trade, and it may have some legs • ESG management, not ESG scores: Van explains the difference, as well as KBRA's approach to evaluating ESG
In this week’s episode of 3 Things in Credit, KBRA Chief Strategist Van Hesser: Digs into the strength of the U.S. housing market; Investigates the nature of bubbles and how credit investors can tell dangerous ones from those that are simply sideshows; and examines 2021 estimated corporate earnings growth—is it 24% or just 4%? It all depends on your perspective.
KBRA launches the second episode of 3 Things in Credit, a new KBRA Podcasts series hosted by Chief Strategist Van Hesser. In this week's episode, Van looks at clues to the economic outlook revealed in big bank Q4 earnings, important milestones in aviation finance, and what credit investors need to know about our presidential transfer of power.
Our inaugural episode discusses the durability of credit in 2021, the economic drag presented by a growing number of “zombie” companies, and conditions driving an active new issue calendar.