Weekly News – January 12

Dish asset swaps…

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Find it here on LevFin Insights

leading to strong-armed tactics…

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Find it here on LevFin Insights

Audacy files for BK in SDTX

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Find it here on Reorg
Find the Company’s announcement here

Competition heating up in NJ

Our take:

This is how it starts… like a carnival barker looking for kids to get on the newest ride at the amusement park.
Tell us what you think here

9fin shares their roadmap for 2024

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Find it here on 9fin

FTX on the asset hunt

FDIC rejects SVB’s claim

Refunds looking unlikely….

Read the SCOTUS oral argument transcript here

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Bruce Richards on the Markets

Bruce Richards, CEO
Marathon Asset Management
insights on markets, investing and more!

Inflation: More Work To Do

Mr. Market is pricing a 67% probability the Fed will cut rates in March, with six rate cuts during calendar â€™24, down from 90% probability and 7 rate reductions just two weeks ago. Treasury rates have adjusted marginally higher, and credit spreads have increased as the market has begun to adjust to an overly rosy rate outlook. Strong employment gains with inflation stuck at 3%-plus does not provide the Fed with adequate cover or necessary data to justify reducing rates in Q1. Fed Funds should eventually be +100bp to +150bp above the inflation (PCE), creating a Real Funds Rate of 1 to 1.5%%, which implies inflation of 2%, the Fed will bring its Fed Funds rate to 3% – 3.5%, or 200bp lower than where it is today. I believe the Fed will be slow and steady, maintaining its current posture until job growth slows to a trickle and inflation is comfortably sitting at around 2% and not risk re-stimulating inflation. (Note 1: The election has nothing to do with the Fed; the Fed is data dependent and wants no part of influencing a political election. Period.)

Headline and Core CPI picked up from last month, exceeding survey expectations. Headline and Core CPI is growing at a 3.4% and 3.9% annualized pace, respectively. Goods inflation was flat, which ends a 6-month streak of falling goods prices, led by both new and used vehicles. OER and rent, which together account for more than a third of CPI, remain at elevated levels of 5.7% 3-month annualized pace. Non-housing services remained strong coming in at a 4.3% 3-month annualized pace, led by airfares and medical care.

Loretta Mester, Cleveland Fed President, said â€œI think March is probably too early in my estimate for a rate decline because I think we need to see some more evidenceâ€¦.the December CPI report just shows thereâ€™s more work to do, and that work is going to take restrictive monetary policy.â€ There are two more CPI prints between now and the March meeting, not enough time, or data points to alter the firm employment or inflation data being reported. I am thankful to our Federal Reserve for taking the action they took to get inflation under control, and applaud the Fed for diligence, even if it means Higher for Longer.

(Special Note: Argentina has seen its inflation sour from 120% to 150% in the most recent month, which is clearly unsustainable; while Turkey has taken specific measures to address its high rate of inflation with Turkey CPI declining from 85% to 65% over the past few month).

To follow Bruce’s thoughts on markets, investing, and more follow @bruce_markets

What we’re reading…

Goldman on Earnings Season

DB sees consumer weakness in Q2 2024

DQ provisions in the news…

Our take:Â
If you want to read more on DQ provisions, look no further than our latest feature!

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Contributors Speak Up:
Our Contributors take on DQ provisions

We take on Disqualified Lender provisions. We were shocked by what we learned, Not only are distressed investors targeted but usually weeks if not months after a trade occurs. Serta, Packers and Bijyu’s are the latest examples of a troubling trend.

Read what Contributors Paul Silverstein, Justin Forlenza, Sid Levinson and Jim Millar have to say about this topic.

Some excerpts below:

Aggressive sponsors want the option to disqualify distressed investors from owning their portfolio companyâ€™s loans.

a fundamental practical problem lies in the lack of transparency as to who is disqualified from owning a loan because DQ Lists are generally not available at time of trade notwithstanding that many credit agreements provide for the lists to be made available to lenders.

But buyer consent is not obtained until closing, which can be many weeks or even months after the date the trade actually occurred. If the loan buyer is on the DQ List, the borrower can then reject the trade well after-the-fact.

Read the full feature here

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