Josh Wolfe @wolfejosh VC, entrepreneur, fund manager @Lux_Capital; Chair @CiPrep Coney Island Prep; Trustee @SfiScience Santa Fe Inst; CoFounder of Carson, Quinn & Bodhi w/ @ltwolfe Jun. 04, 2019 1 min read

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

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You can follow @wolfejosh.



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