06-28-2017, 10:59 PM
Oil is less than $10 per barrel away from a level where it could begin wreaking havoc across the high-yield bond market. When crude drops below $35 a barrel, the debt-to-enterprise value ratios of high-yield energy companies typically climb above 55 percent, according to Deutsche Bank AG strategists including Oleg Malentyev. That would increase risk premiums and affect the wider high-yield market, they said.
Oil at $35 Is Tipping Point for High-Yield, Deutsche Says - Bloomberg
Don't let the calmest market in years lull you to sleep. While a gauge of volatility spanning multiple asset classes has slipped to its lowest level since 2014, a separate measure of market fragility has been climbing steadily over the past six months, according to Bank of America Merrill Lynch. The so-called "Fragility Indicator," maintained by BAML, is designed to measure the frequency and extent to which volatility measures and credit spreads are seeing abnormally large shocks. And it's climbed roughly 50% since October. This is notable because the last three times the fragility gauge rose sharply — in the second half of 2007, first half of 2011 and second half of 2014 — it preceded drawdowns from hedge funds, according to BAML.
Goldman Sachs told clients that the environment is more difficult for picking stocks of quality companies, and as a result investors should be willing to accept longer holding periods and hold fewer stocks. The Wall Street firm has revised a list of recommended stocks it calls the GS Sustain 50 to reflect the new market realities. "Quality investing faces challenges it isn't used to," Goldman's Hugo Scott-Gall wrote in a research note Sunday. Returns aren't as strong from simple buy-and-hold quality strategies, he said. "With returns on capital falling and growth lower, fewer companies are in the virtuous compounding circle."
Goldman says ‘buy and hold’ investing is broken, but this new strategy will work
And following the herd can really pay off when the market is flourishing. The more people that pile into a stock during an up-market, the further its share price will climb. It's a momentum-driven strategy that looks simple on the surface, but can backfire in spectacular fashion at the first sign of turbulence. The more crowded a trade, the more painful the fall as investors rush to the exit simultaneously, spurring a vicious unwind.
UBS: Here are the 9 most crowded stocks - Business Insider
Buffett is no stranger to Retail REITs. In 1999, Buffett likely purchased shares in Tanger as a fixed income product. Mr. Buffett, it's time to back up the truck! Most all Retail REITs got a nice boost yesterday thanks to Berkshire Hathaway (BRK.A) (NYSE:BRK.B). As I explained in a recent article, Net Lease REITs should get a nice boost today thanks to Warren Buffett. More specifically, Berkshire Hathaway is now a 9.8% owner in Scottsdale-based STORE Capital. Berkshire Hathaway has invested $377 million in STORE.
Mr. Buffett, It's Time For Tanger - Tanger Factory Outlet Centers, Inc. (NYSE:SKT) | Seeking Alpha