Trade Notes: Is Philippe Jabre Right About European Banks?

Philippe Jabre

Philippe Jabre is turning bullish US equities and bearish (a change of sentiment from last year) European banks.  Either way, he’s being pretty relaxed about allocation as:

There’s enough time to allocate, the markets are not going to disappear, … We’re waiting for asset valuations to return to reflecting fundamentals, and to stop being so correlated.  A lot of European banks have now recovered to book or normalized valuations as uncertainties over the effects of the stress tests and now Basel, have softened.  But loan growth is falling, which will limit earnings growth, and if bank shares are going to trade at above book value, there has to be growth. Continue reading “Trade Notes: Is Philippe Jabre Right About European Banks?”

Trade Notes: CQS’ Distressed Debt Fund

An assortment of United States coins, includin...
Distressed debt: picking up pennies on the dollar, sometimes in front of a bulldozer.

The idea of distressed debt investing is simple enough:  most of the time, debt is bought by institutional investors (otherwise known as long-only investors, or long money) in the hope that the steady (generally in the 6-10% annual) interest returns will be good enough for their long-term obligations.  Then, as the debt cycle gets more and more speculative, you have everyone and their grandmother (sometimes literally) piling in.  As the correction inevitably comes, borrowers can’t pay and lenders panic, and debt starts selling at a discount (i.e., if you are the unlucky owner of a dollar of debt, you want to get rid of it quickly, and are willing to sell at a discount, sometimes at pennies on the dollar).  That’s distressed debt. Continue reading “Trade Notes: CQS’ Distressed Debt Fund”