{"id":38874,"date":"2018-10-08T11:41:47","date_gmt":"2018-10-08T16:41:47","guid":{"rendered":"http:\/\/olduvai.ca\/?p=38874"},"modified":"2018-10-08T11:41:47","modified_gmt":"2018-10-08T16:41:47","slug":"louis-gave-on-corporate-debt-and-the-next-liquidity-crisis","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=38874","title":{"rendered":"Louis Gave On Corporate Debt And The Next Liquidity Crisis"},"content":{"rendered":"<header>\n<div id=\"a-hd\" class=\"sa-art-hd\">\n<h3><a href=\"https:\/\/seekingalpha.com\/article\/4209906-louis-gave-corporate-debt-next-liquidity-crisis\">Louis Gave On Corporate Debt And The Next Liquidity Crisis<\/a><\/h3>\n<\/div>\n<\/header>\n<div id=\"a-cont\">\n<div id=\"a-body\" class=\"sa-art article-width\">\n<p class=\"p p1\"><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/tYSGA7Ee4z4\" width=\"560\" height=\"315\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p class=\"p p1\">This has been a good year for the stock market so far, at least in the U.S., yet many investors are wondering when the other shoe will drop. We spoke with Louis-Vincent Gave, founding partner and CEO at Gavekal Research, about the explosion in near junk corporate debt and why this is a problem during the next economic downturn.<\/p>\n<p class=\"p p1\">For audio, see <a href=\"https:\/\/www.financialsense.com\/louise-gave-bond-market-liquidity-new-leverage\" rel=\"nofollow\">Louis Gave: Bond Market Liquidity Is the New Leverage<\/a><\/p>\n<p class=\"p p1\"><strong>Bond Market Liquidity Is a Problem<\/strong><\/p>\n<p class=\"p p1\">The situation that&#8217;s developed is concerning. With the growth of exchange-traded funds (ETFs) in the corporate bond space, we have players that are guaranteeing daily liquidity in an asset class that historically doesn&#8217;t always guarantee liquidity.<\/p>\n<p class=\"p p1\">Today, if investors need liquidity in a hurry, they&#8217;re essentially on their own, Gave stated. Meaning we might notice a dislocation in corporate bonds, keeping in mind that we&#8217;ve seen record issuance.<\/p>\n<p class=\"p p1\">Normally, corporate debt relative to GDP makes highs at the bottom of the cycle when GDP is shrinking and everybody&#8217;s tapping their credit lines. Corporate debt relative to GDP is extremely high, and interestingly, Gave noted, the amount of debt that&#8217;s grown the fastest is just one notch above junk.<\/p>\n<p class=\"p p1\">During the next recession, the number of companies that will be downgraded will lead to forced selling by institutions. This is one of Gave&#8217;s greatest concerns today.<\/p>\n<p class=\"p p1\"><a href=\"https:\/\/static.seekingalpha.com\/uploads\/2018\/10\/4\/saupload_corporate-debt-to-gdp.png\" rel=\"lightbox\" data-width=\"749\" data-height=\"433\" data-og-image-twitter_small_card=\"true\" data-og-image-twitter_large_card=\"true\" data-og-image-twitter_image_post=\"true\" data-og-image-msn=\"true\" data-og-image-facebook=\"true\" data-og-image-google_news=\"true\" data-og-image-google_plus=\"true\" data-og-image-linkdin=\"true\"><img decoding=\"async\" src=\"https:\/\/static.seekingalpha.com\/uploads\/2018\/10\/4\/saupload_corporate-debt-to-gdp_thumb1.png\" data-width=\"640\" data-height=\"370\" data-og-image-twitter_small_card=\"true\" data-og-image-twitter_large_card=\"true\" data-og-image-twitter_image_post=\"true\" data-og-image-msn=\"true\" data-og-image-facebook=\"true\" data-og-image-google_news=\"true\" data-og-image-google_plus=\"true\" data-og-image-linkdin=\"true\" \/><\/a><br \/>\nSource: Gluskin Sheff<\/p>\n<p class=\"p p1\"><strong>Buyer of Last Resort<\/strong><\/p>\n<p class=\"p p1\">We&#8217;ve had a semi-crisis in emerging markets this year and U.S. bond yields have come down, which normally provides some cushion to the system. This is the first time in Gave&#8217;s career where U.S. bond yields have gone up while emerging markets were under pressure.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Louis Gave On Corporate Debt And The Next Liquidity Crisis This has been a good year for the stock market so far, at least in the U.S., yet many investors are wondering when the other shoe will drop. We spoke with Louis-Vincent Gave, founding partner and CEO at Gavekal Research, about the explosion in near [&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":[5185,3186,8898,15655,20286,487,6697,22194,6053],"class_list":["post-38874","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bond-market","tag-bond-yields","tag-corporate-debt","tag-gavekal-research","tag-jim-puplava","tag-liquidity","tag-liquidity-crisis","tag-louis-gave","tag-us-bonds"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38874","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=38874"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38874\/revisions"}],"predecessor-version":[{"id":38875,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38874\/revisions\/38875"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=38874"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=38874"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=38874"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}