Josh Wolfe+ Your Authors @wolfejosh Co-Founder @Lux_Capital Trustee @SfiScience Santa Fe Inst Chair @CiPrep Coney Island Prep (Brooklyn) Co-Founder of Carson, Quinn & Bodhi w/ @ltwolfe Jun. 04, 2019 1 min read + Your Authors

The BEST non-obvious hypothesis a friend shared:

-the people testifying in front of Congress in last financial crisis: mortgage lenders + banks + credit agencies

-the NEXT group? Maybe Blackrock, PIMCO + (ratings firms ~ Morningstar). Esp BOND mutual funds

Why? ILLIQUIDITY.

2/ How? Low rates pushed people out on risk curve—for reitrees that meant switching to seemingly safe HIGH YIELD bond funds

IF underlying issue defaults, NAV drop, shares can drop 20%+ with permanent principal loss.

COULD that happen? It did...

3/ The 3 months ending 10/31/98 worst-performing HY fund Dreyfus High Yield dropped 26.9%. Fidelity + Northeast dropped 13%.

Everyone talks of trade, tariffs, Softbank, Uber, equities, election—

where is the buzz about the masses in junk bond mutual funds?

Therein lies RISK

4/

5/

6/


You can follow @wolfejosh.



Bookmark

____
Tip: mention @threader_app on a Twitter thread with the keyword “compile” to get a link to it.

Enjoy Threader? Sign up.

Since you’re here...

... we’re asking visitors like you to make a contribution to support this independent project. In these uncertain times, access to information is vital. Threader gets 1,000,000+ visits a month and our iOS Twitter client was featured as an App of the Day by Apple. Your financial support will help two developers to keep working on this app. Everyone’s contribution, big or small, is so valuable. Support Threader by becoming premium or by donating on PayPal. Thank you.


Follow Threader