{"id":36082,"date":"2018-07-20T08:24:58","date_gmt":"2018-07-20T13:24:58","guid":{"rendered":"http:\/\/olduvai.ca\/?p=36082"},"modified":"2018-07-20T08:24:58","modified_gmt":"2018-07-20T13:24:58","slug":"thats-a-super-dangerous-place-to-be-ceo-of-jpmorgan-asset-management","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=36082","title":{"rendered":"\u201cThat\u2019s a Super Dangerous Place to Be\u201d: CEO of JPMorgan Asset Management"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"http:\/\/\u2026click on the above link to read the rest of the article\u2026\">\u201cThat\u2019s a Super Dangerous Place to Be\u201d: CEO of JPMorgan Asset Management<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>When central banks distort the markets, risk disappears from view.<\/strong><\/p>\n<p>\u201cYou could have a bunch of walking-zombie companies and you don\u2019t even know it,\u201d explained Mary Callahan Erdoes, CEO of JPMorgan Asset Management, on Wednesday at the Delivering Alpha Conference in New York. \u201cThat\u2019s a super dangerous place to be,\u201d she said.<\/p>\n<p>She was talking about the effects of the ECB\u2019s bond buying program as part of a broader warning that investors are no longer seeing risks.<\/p>\n<p>The ECB has been buying corporate bonds, among other things, in an explicit effort to distort the bond market and drive corporate bond yields to near zero. At the peak of the frenzy last fall, the average euro junk-bond yield fell to 2.08% \u2014 though it has risen since. These are bonds with an appreciable risk of default. But the yield was barely enough to cover inflation (currently 2.0%). Credit risk wasn\u2019t priced in at all.<\/p>\n<p>The bond-buying binge has created a universe of bonds with negative yields, and desperate investors who\u2019ll take any risk without compensation just to cover inflation. This desperation supplies fresh money to burn to even the riskiest zombie companies.<\/p>\n<p>Companies have relentlessly taken advantage of this investor desperation. The amount of corporate euro bonds outstanding has surged by about 45% over the past three years, to \u20ac1.5 trillion ($1.75 trillion), including <a href=\"https:\/\/wolfstreet.com\/2018\/07\/13\/nirp-did-it-im-in-awe-of-how-central-bank-policies-blind-investors-to-risks\/\">record euro-bonds issued by American junk-rated companies<\/a>.<\/p>\n<p>When credit risk is not being priced at all \u2013 when it\u2019s free \u2013 this most important gauge of the credit market is worthless.<\/p>\n<p>\u201cYou\u2019re equally rewarding the A-plus student and the student who\u2019s doing no homework and is just showing up,\u201d Erdoes said at the conference, as reported by <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2018-07-18\/jpmorgan-s-erdoes-says-ecb-bond-buying-creates-zombie-companies\">Bloomberg<\/a>.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>\u201cThat\u2019s a Super Dangerous Place to Be\u201d: CEO of JPMorgan Asset Management When central banks distort the markets, risk disappears from view. \u201cYou could have a bunch of walking-zombie companies and you don\u2019t even know it,\u201d explained Mary Callahan Erdoes, CEO of JPMorgan Asset Management, on Wednesday at the Delivering Alpha Conference in New York. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[124,3954,233,282,2267,20937,690,4254,4255],"class_list":["post-36082","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-corporate-bonds","tag-ecb","tag-european-central-bank","tag-jp-morgan","tag-mary-callahan-erdoes","tag-risk","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36082","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=36082"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36082\/revisions"}],"predecessor-version":[{"id":36083,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36082\/revisions\/36083"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36082"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}