Nov 11, 2024
On this
week's Stansberry
Investor Hour, Dan and
Corey welcome Martin "Marty" Fridson
back to the show. Marty is an
author and expert in the field of high-yield bond investing.
He
is also a senior analyst at
Porter & Co.'s Distressed Investing newsletter.
Marty kicks off the show by
discussing the top-down view of the high-yield market.
He
comments that right now, there
is a very small risk premium. Marty breaks down the
factors
that he uses in his model of
fair value and concludes that the high-yield market is
extremely
overvalued. At the same time,
the market is forecasting a higher default rate than
credit-
ratings agency Moody's. Marty
also gives his opinion on whether we'll see a recession,
what
it means that the inverted
yield curve has not yet resulted in a recession, and why he's
less
critical of the Federal Reserve
than other investors. (1:39)
Next, Marty explains that the
current situation of the federal-funds rate and the 10-year
U.S.
Treasury yield moving in
opposite directions is not rare. He says it happens 40% of the
time.
This segues to a discussion
about what's happening with the junk-bond market...
including
companies potentially having to
roll over their debt to higher rates... and private
credit
lenders now competing with
high-yield bond buyers. Marty then names which
sectors
present attractive buying
opportunities today. (18:03)
Finally, Marty goes further in
depth about his quantitative model and what data it
draws
upon to find attractively
priced distressed debt. He then explains that because
high-yield
bonds aren't very liquid,
exchange-traded funds centered around these investments tend
to
have a lot of variance in
performance. This can have serious consequences in times
of
extreme market disruption.
(34:12)