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


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




You can follow @wolfejosh.


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