Craig Advice – Partner since 2008 (Canmore, Alberta)
This week in charts
Who owns U.S. equity?
Share buybacks by U.S. companies
Projected top-6 countries by population in 2100
CLO Managers Face Trading Crunch in Downturn
By the end of 2023, more than 40% of collateralized loan obligations will be subject to restrictions on their ability to easily manage their portfolio by investing in new loans, according to Bank of America Corp.
That means CLO managers will have less flexibility to keep their loan collateral safe just when they need it most. The share of CCC rated loans in CLO portfolios hit 5.6% by mid-December, according to the bank, not far from the carefully watched 7.5% level where individual CLOs may need to begin looking to divert cash flows from equity holders.
“CLO managers are likely working hard to sort out the B- loans that will eventually be downgraded from those that won’t be downgraded,” said Steven Abrahams of Amherst Pierpont Securities, a broker-dealer owned by Santander.
One way they’ll be able to tell the good from the bad is by looking at prices. The universe of loans rated B- is trading at a wide range, from roughly 70 to 90 cents on the dollar. The main difficulty lies in what to do about loans at the bottom end of that range. It’s too late now to sell those loans without locking in steep losses.
“The ability to pick through loans to separate the ones that can be salvaged from the ones that can’t is what will distinguish managers this year,” said Abrahams.
This week’s fun finds
EdgePointers continue (and adapt) an annual tradition
We delayed our annual holiday gathering into the new year, but it was worth the wait as (partner-shucked) oysters made their way to the festivities.
Tea if by sea, cha if by land: Why the world only has two words for tea
With a few minor exceptions, there are really only two ways to say “tea” in the world. One is like the English term—té in Spanish and tee in Afrikaans are two examples. The other is some variation of cha, like chay in Hindi.
Both versions come from China. How they spread around the world offers a clear picture of how globalization worked before “globalization” was a term anybody used. The words that sound like “cha” spread across land, along the Silk Road. The “tea”-like phrasings spread over water, by Dutch traders bringing the novel leaves back to Europe.
A few languages have their own way of talking about tea. These languages are generally in places where tea grows naturally, which led locals to develop their own way to refer to it. In Burmese, for example, tea leaves are lakphak.
