YouSaid · the spoken record

Paul Latronica

lines on the record: 105
first: 2022-08-29
most recent: 2022-08-29
sittings or episodes: 1
sources: podcast

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“It's a portfolio of securities that you look at to make an ultimate return on, and you're not going to get everyone right all the time. As a professional money manager, knowing when to cut that loss and just moving on to something else makes a lot more sense on the downside. So those are kind of the two mistakes that occur in our marketplace, you know, but yeah. I mean, that could happen in any market, truthfully, right?”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“But look It tends to be Getting out too early is the most frequent mistake on the upside where strategically if you think you hit it strategically if the bond gets to a certain level, 120, 130, you move out of that security and then you have a Tesla-like scenario where it just keeps going, right? And strategically, and on the downside, the biggest mistake is holding on to that lose your too long, looking for that turnaround, right? Because you can hit points where there's no natural investors anymore and the bond can just drop down till you find that credit crossover investor. So really protecting your capital on the downside and not falling in love with the fact that, okay, you made an investment, you may have made, you know, it looked like the right decision at that point of investment, but as things change, not reevaluating that and not taking action because the bond is lower. It's not the case. This is a portfolio security.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“And that's identifying that's what we're doing here identifying those valuation discounts that are more advantageous for the client base.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“It's absolutely more alpha to be had, right? There's more alpha to be had in the product just given the nuances of how it works in the fact that, again, it's a credit instrument with the equity option and the payoffs are different at any point of where the equity is trading and where the credit is trading. To access that alpha, yeah, you're right. It's not just a pure beta play going along something. It's finding those nuanced securities where it's mispriced on the credit side. It's mispriced on the volatility side. And that, you know, purchasing that on behalf of a client or just in general gives you an edge up on a broader market because you're getting it, you're getting exposure through a security that's not only just a discount in price, but a discount and valuation.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“There's not that much edge there, but there are tons of things that could happen idiosyncratic things with the Snap convert where a call option attached could be extremely undervalued at you and your team, someone on your team would flag that to you and you would buy it because you're doing this all day unlike retail investors who their job is not investing. And likewise, something really weird happened and there's a credit thing and you sold it and you got out of it that maybe the retail investor wouldn't. So would you agree or disagree that there is more alpha than in the equity market for sort of institutional?”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Don't, you know, if you believe that company is going to be around in four years, right, you can buy that piece of debt, have a guaranteed return and the potential for a massive upside return, right? And it may not be as sexy as buying the stock, but it's a way to like preserve capital and have outsized returns over a period of time or over, say, the four years right now. And mind you, just go to Snapchat. It was $70 ago. Where's the stock 14? We could argue what they're. We can argue about the valuation of it at any point, right? Anyone can do an equity valuation. But as they work through their certain situations, maybe that stock can go to 24 as the Fed stuffs. Maybe that stock can go to 30. Maybe the stock can go to 5. If the stock's at five, you're still going to get your 7.5%.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“A bundle of them, a good amount of them, that do have convertible debt, that if you were to purchase, the asymmetry of the return is so much more beneficial. Now, everyone loves the big score. You buy a stock at 12, it goes to 24, you sell it, you tell everybody about that. But nobody talks about the stock they bought at 12 and goes to 2 or 12 and goes to 5, right? A portfolio of these type of memes, like the Snapchats, the Ubers, the Lyfts, the Airbnbs, a portfolio of these type of names, and names that people invest in in equities. Rito has invested in equities.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“So let me put it this way Snapchat, let me just throw a name out there, right? You can buy the stock today. It's going to be moving up and down all over the place. You can buy a convertible bond with a 6.5% yield for four years. People know Snapchat. They know what they do. Retail investors are buying that day and night. Now, in the next four years, Snapchat's right where it is today. You'll make six and a half percent, right? If that stock moves higher in these next four years, right, that bond could be trading right now at 75, it could be trading at 125, 130. You can technically outperform the stock over time with the convertible bond. So simplistically, getting away from all the credit and deep whatever, simplistically, if you look at certain names that you like to own, you want to own as a retail investor.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Now, over a long term, obviously, that compounds. But I'd like to think that you have a pretty massive edge and you have a bigger edge over the retail investor buying convertible bonds than like Warren Buffett does buying stocks, right? Because stocks are kind of easy”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, thanks, Jack. I hope people can understand a little better what the convertible product is about. And it's a unique asset class, but it's one that even though it is overlooked, it should be given more consideration by not only institutions, but also the retail side of things. And there's great ways to access it out there. But overall, it's a developed market and one that's very advantageous for investors all around.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“So that stabling to improving environment in the market or the rise of rates within the marketplace will tend to be accompanied by that rise in equities. Now, again, right now we're not seeing that, but I think as the full cycle goes through, we're going to have that back end benefit in our product.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Well, not only because of low duration, because in those periods, equities tend to be doing better, right? Because that's a point where they're trying to slow down the economy and equities tend to start moving higher. So initially in this front end of this rate move, there's more of a shock and equities are repricing themselves. But I think as we see through the back end of, as we start seeing to the back end, to the end of this rate cycle, you're going to have a revaluation on equities that would probably drive convertible valuations to a higher level, but the fixed income market is still held back from the pure spread situation.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so look, historically, if you look back in periods where interest rates have risen, convertibles have outperformed other fixed income asset classes.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Stress situation. It's not overnight, right? There's a negative headline, that's where it takes the kind of professional look at the credit and just determine that this is really not worthy for investment anymore. And you move out of those type of situations. We very successfully moved out of a lot of those oil names in that period. And unfortunately, in this latest move higher in the energy space, there's very little representation in our market there. So it wasn't something that you know convertible investors had access to, but I'm assuming most debt investors had access to that through high yield or other types of credits.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Really high volatile energy prices where the price of oil went from $100 a barrel to $20 a barrel. And you had a lot of names like Weatherford and Chesapeake with convertible debt that was good balance sheet producing a lot of oil, revenues coming in, cash coming in. And they're continually growing. But then when you started looking at the cost of production relative to the price, the dropping trajectory of underlying price of oil, a barrel of oil, numbers didn't start to work anymore. And as you started going deeper, $30, $20, like there's no sign to the back end of this. So when those type of events occur and you're staying on top of what's happening, you're going to, you know, that's when you rebalance, say, you know what? This floor won't hold. And you're right. The floor does move down, but it takes time for it to kind of really develop to a”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Correct, correct. And that's why it's again investing in the credit and continually monitoring that credit is very important. So having a disciplined approach, what you learn where to sell, whether it's working, whether it's not, has really allowed us to avoid those really deep drawdowns on individual securities. And it's like a great example was 2015.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“The loss, but you have this really strong potential or ability to participate in the upside when and if the stock moves higher.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so look, I mean, it's a combination, it's a perfect storm, falling equity values and defaults increasing, right? That's a perfect storm for any market, right? All markets. That would be, I would say, would overall credit markets in general are fearful of continued widing spreads and equities selling off to a point where it just puts additional pressure on capital structures, right? So that would be the same for the convertible market. But, you know, as I said, there's a heck of an opportunity. And I think what we're seeing is just more interest, say, from investors, allocators at the product given kind of the benefits it can provide in a current uncertain volatile market, right? Again, you're getting equity exposure through a fixed income instrument. So at least there's a floor.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“those securities by funding Elon Musk in that period. So he was a big user of the product and you can say that at that period it was the lifeline Tesla needed to grow. No straight debt market was blending to Elon Musk and Tesla at that point. But the convert market, given the fact they saw that four to five year option I could buy right here right now, right on a company that's pretty darn innovative, but a great product and a strong leader that worked for them, that worked for a class of investors. But I tend to like to see profitability. I tend to like to see balance sheets that I can see through to the endpoint and see them being able to pay back or company be able to pay back this debt. Because again, the typical investor in this part of the curve doesn't want to lose money.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“They come in the convertible market and they raise the capital they needed to get through the shorter term. Tesla, I think, had about five different convertibles in the point of their life. And really that bridge them to profitability. Now it's a different entity in the fact that this company had a whole different following behind it. But at that point it was a story. And initially I kind of passed on it until there was more viability within it. So they had bonds that were trading right where we had bonds trading today in the 80s and the 70s, right? And then once the equity story started to play out and they started producing cars and they hit profitability several quarters into that, the stock started to move and these bonds that were trading in the 80s, 110, 112, I mean, their bonds trading at $1,200 last Tesla bond out. It's very, very small amount, but it was such a massive return.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“A market cap with a story that can really end badly for you. Now, I'm not saying that they haven't been successful over the years, right? And I'll pull out a name for you, which was one of the bigger issuers in converts at a time where the company almost folded, and it's Tesla. Everyone loves Tesla. You know, Tesla survived based on issuing convertible debt. And there was that point where, you know, Elon was going a little sideways. and they were starting to build a tent to produce cars in Fremont, California.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, look, most convertible bonds have all kind of the indenture protections you need. It's not like some of these markets where you get covenant light and the sorts. You have all types of protections written within. What I don't like in some of the, I guess some of the issuers or those are like we have some pre-revenue issuers. I won't touch that kind of stuff. You have issuers that are. Are too young to have an operating history or there's an issue in management? So there's a lot of that where you have to look through these securities. And because the proposition of asymmetry is held up through credit, if you can't define the credit and if you're just basically purely investing on a story.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“I think it's around 55% now, like 10% of it moved up, and like below par is 99, 98 or so. But, you know, I think everything kind of moved up a level, right? The yields of Titan just a level. When you're talking like four to five point sponds have moved up before, and you saw that in the high yield markets as well, right? Right across credit markets. So yeah, so there's still a large opportunity set. It's still large, you know, relative to historics. And it's just like a very advantageous part of the curve.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Right. And it's going to move around broader markets. I mean, the pricing is moved around with broader markets. But that's it.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“I'm just thinking going forward, maybe you don't hit that depth that we were at in June. At least in the near term, where floors were put in and a lot of interested buyers step into the marketplace. And any of these historically, any of these type of volatility or drawbacks in the broader market, you have that move lower. And once you get one of those rallies, right, you almost get that FOMO that goes on, that once you get that pullback again, you'll get investors to get interested. You'll get investors to jump in and make allocations or pick up paper at lower levels than where the current leak traded today. But yeah, so I said like the average duration is 2.2 years. Obviously, some of the fixed income securities maybe have a 3.3.2 3.3 year type duration profile. But net net, it's pretty darn short.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. I mean, look, as the market is trying to find its floor and it's trying to find how to price assets in general, there is volatility within the fixed income space. And there's volatility in our space too. It's a natural market where there's buyers and sellers at every point. And really, the desks that we transact with, right? It's an over-the-counter market. Didn't mention that. It's very over the counter market. Most of the large banks do transact in it. But those desks have to find the next interested buyer, which could cause volatility pockets. But, you know, as you're saying, like, you know, as the two-year treasury is moving, equities are moving conversely to that, right? And that's creating like just different pricing valuations for converts, right? Because as the equities are rallying, credits have kind of stabilized. And at the same point, the reverse occurs.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“And the thing I came back to you is, I know people love to use that name, but like in that part of the market, I would say busted implies the option is no value. I just think now because of the extreme moves and these equities, that that option does have a lot of value, that the volatility in these underlines were so high, that even though people are not really valuing that, it's the hidden part. It's that hidden gem within these discount securities is to get access to that option. So yes, people will continue to call it busted converts when the bonds are trading with a high premium or out of the money option. But I think that's part of the, I think the attractiveness of that part of the market is the fact that people may not be valuing an option too much, right? But historically, there's always been, you know, those parts of the market, the busted part, the balanced part, and the equity part.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“But it's still over 55% of this market is on that discount level, right? Right. And I think something you asked me at the other point too is, you know, hey, what about the busted part of the market? People like to talk about busted convertibles, right? Yeah.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“this type of structure is that you can naturally reduce your risk and really focus back on the part of the curve based on movements in the bonds right because if you don't actively manage it you know you buy a bond at 80 mean that could be at 140 in a couple of months and trading one for one with the stock and therefore your volatility is going to pick up and a pullback comes on the market and you're going to draw down just as much as the broader market did right so actively managing the part of the curve you're in is very critical um to keeping that lower delta profile lower vol profile within a portfolio um but uh you know in saying that it's the opportunity still ebbs and flows right even through this earnings season several names have just drawn right back down into that that sweet spot um and other names have moved up and out so the opportunity set is continually refreshing itself”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so look, we've came a long way in a short period of time in a pretty low volume marketplace where a lot of people are waiting for the next signal. I would say now I was very bullish then for the simple fact that the opportunity set was just screaming at me, right? It was like, okay, there's so many things that we can buy right here that make a lot of sense over the course of time. I would say now I'm just a little more cautious on the potential of what's going to go on in the next couple of months as we get more data coming out. You know, the markets move at a very rapid pace, whether it's because of how it's made up these days through algorithmic trading and passive investment styles. But I would say I'm just a little bit cautious right now on what the broader market's going to do. But when I still look at my portfolio, the nice part about active management within”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“A great opportunity in this part of the curve and just currently with the market is giving us, it's giving us excess opportunity to not only invest in discounted credits, but also discounted volatil”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Part of the curve really have to have the lens on credit investing. And then the third is that equity option? Like, can there be a recovery in this equity to give me that more outsized return? It's not just that fixed yield to maturity, right? Because that's the kicker there. It's getting that growth piece to kick in over the life of the bond, right? So if it's a shorter dated option, one year, one year and a half out, maybe that doesn't have the interest that you want it. Maybe I'm not going to be able to get to that point where that equity option kicks in. But when you're looking at three and four years out, well, look, that's pretty short for the company, meaning that that bond floor is going to hold three-year paper of a company that you can analyze the credit, that floor will hold so your downside will hold. But now you have three years post this current market environment to participate in the equity. And again, a lot of them have come down pretty hard just in the broader market as well as an armed market. So it's...”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Because cos converts can morph into an equity product of that security no longer has the traits that your investor wants. So as it migrates up the curve and you have those bonds that trade with a higher equity value, a fixed income convert guy will move out of that security because the asymmetry is no longer there. Right now you're showing on that stock to work to go higher, right? So again, the type of investors, the wealthy individual who wants market exposure, right, but doesn't want to buy straight equities and may not find the credit opportunities they want, you can utilize like that discount convertible product to get exposure to the market protecting your principal, but setting yourself up for outer size returns in the future. So it starts with the structure. We look at the credit very deeply. Credit team here and most people investing in this part of the line really have to.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“If the market changed, something changed. I'm not afraid to move that out of the portfolio really because that sweet spot is kind of finding those securities with that best positive asymmetry. So you're basically sourcing out of the money stocks and out of the money options through that fixed income instrument. And it's so powerful in a recovery to have that combination of both credit and equity pushing together, right? And that's what that creates that really interesting portfolio for my investors. The other key to it really is, when do you leave an investment? And part of.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Going to make money. We don't know how much, but you're going to make money barring the default. You're going to make money, right? Whether it's a positive, it's going to be a positive yield. And you have that potential for an outsized, upsize return, right? And the key to investing over time, right, is losing less in the downturns, losing less on any one investment, but participating in the upside in growth over time. What I'm looking for is a structure. The structure where I can put a dollar into the marketplace may have two to three points of downside in the shorter term, but then my upside is seven to eight points, right? So the asymmetry is a positive asymmetry in that investment. And then two is that credit perspective, right? Because that makes you avoid that really big drawdown, right? That really big drawdown. So if I buy something and something drastically changes within the credit, I'm not afraid to sell that.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“I love the instrument for what it is. And that's what I'm investing in. I'm investing in the securities and the credits. And the securities are the most brilliant thing. And that's what people like, it's hard to get that out there, that putting a dollar in a convertible bond at a discount.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Right. And what point, you know, so you manage a fund that invests in these convertible securities, how do you view your role as I'm going to make sure that I have the best baskets of securities on a quantitative basis, whereas Joe Shmo or Jack Farley or whoever who's buying convertible bonds, they're not going to be looking and paying attention to these things with as much rigor and attention as me? Or do you view it as you're sort of picking styles as you're less so a convertible bond investor and you're more of a sort of growth equity investor? Because just it sounds like based on the composition of the companies, that is a lot of the sectors that the companies are involved in.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“What are the first things that were to move? Like, you tell me what equities are going to move first? It's going to be those type of equities that people go back to. They go back to growth. They go back to innovation. So that really sets the product up for the next two, three years out to really outperform broader credit markets, say, because I'm looking at this as a credit instrument to really outperform broader credit markets. So what initially was the, I guess, the hit to the market or the downfall of the market is now becoming a really big opportunity set, right?”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“What helped us were the credits and balance sheets, right? Because eventually when that stock went down enough, those credits start to hold up because you start looking at these market caps, you start looking at the balance sheet. I mean, a lot of these companies issue with zero interest, zero coupon bonds at a premium. So even if the bond is trading 80 cents, no, there's zero interest expense for them over the next four years. And so they have great technology. They have great companies. They have great growth prospects. And even if you brought those down and you hammer them in the current market condition, you cut them, you see your way through to a back end where, okay, the company will exist and it's really up to the market. It's up to them to grow into some of their valuation, but the market has discounted this valuation so much that as you start seeing green sheets to the back end, as you see the Fed kind of start to back off.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so it's interesting enough that because of the types of companies that came to the marketplace over the last two years, they tended to trade at a higher PE level, right? Or just a higher valuation or multiple revenue or sales. Yeah, yeah. So I would see the greatest enemy to the broader market was the devaluation in these type of companies, basically the lack of interest in non-cash producing companies. That was kind of the overall theme in the equity markets, because that's the part of the market that most got hit. And that was largely represented in our marketplace. So the underlying equities of converts did underperform, say, the S&P and the Nasdaq in this period, right?”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“You're kind of poisoning yourself to be participatory or participate in the longer term move in the marketplace where it eventually gets back on track or there's eventually a point where equities can move the trajectory higher.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“looking where to invest a dollar today is very difficult right how do I buy an equity right here right now after this run we've seen in the shorter term where we don't know what the longer term or even several quarters out looks like you know a lot of high yield debt is tightened to a point where I speak to some of the high yield managers and they're like well yeah It's kind of very quick, very far. But now you have this other product which kind of has this hybrid of both. You have that credit tilt to it with an equity option where even if you do push back, you may do have another 10% drawdown in the equity markets from here. You're going to be very cushioned through the product, right?”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“People may be away. September may bring different things. And you need to really look forward that we're still at these high inflation rates, even though the trajectory is going in the right way. We're starting to see some corporate layoffs at the higher level, right? Not more broadly in the economy yet. And that's kind of the opposing type factors we're seeing. Combination with where rates are, what inflation is doing, and where employment is. But there are a lot of mixed signals coming along, right? And I would just say that.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Or a data dog, right? Stuff like that. You look at these 90 day options, like they're implying 16, 70%, right? But sometimes, and I'm saying these particular things, but sometimes you can access this option within the convertible structure at a 30-volt rate or a 40 volt rate. And now you're talking about three and four years out. Like where are you going to find a three and four year option? You're not unless you have some banker write it for you, which is going to obviously not be price properly, right? So it's really become an incredible opportunity in the market and it's still there, right? Yes, we've had a rally from those bottoms, but there's kind of that sense in the marketplace that, you know.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“We weren't in that same like financial crisis, right? This is more of a kind of like we have the economy has to kind of correct from all of these things that occurred over the last two years, this kind of this environment that we were like unexpectedly were put in through COVID and on the back end of it adjusting to the liquidity that was put into the market, the moves that the Fed has had to make. And it just created this opportunity where where they're naturally are being sold by the more equity-like guys who like the equity sensitivity, not quite yet in the distress area, that it becomes a lot of value, good value, buying really cheap credit, and the basically value and the options for nothing. So if you're an options guy, right? And you're looking at 90-day option or Snapchat or...”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“They still have the ability to pay that off, even with the current metrics on the company, right? So there was a lot of interest and they're still out there. There are a lot of these interesting opportunities to buy these credits where you can't access another market. Cities don't have debt in those markets. You access these credits of equities that have been just pushed down to such a low level. And I say, I feel it's very similar to what I saw back then. The only difference is that”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“We were talking at the height of the sell off of equities in credit. And I was telling you, like, look, I saw this before. I saw this before in 2000. And I don't think this is over right now. I don't think we're through this. We're in this lull in the middle of August that you could potentially have a revisiting. But the opportunity in converts expanded so drastically where not only the opportunity set the names, the amount of names you could look at, but slight little dislocation occurred in one part of the market of a lot of these high-valued equities that were higher valued last year where the stocks have now come down 60, 70, 80 percent from their highs, right? Huge reductions in equity prices. But, you know, you still had like a $10 billion market cap converts the only debt on the balance sheet. They still had most of the cash that they raised. And if you look at kind of the burn down of it, like how they get to the end.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“They're the smart money with a team of lawyers behind them, right? So we talked last, the market was kind of the broader market, not just on converts now. We're talking about the broader market, right?”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“Managers buy convertible bonds because it fits within their mandates, right? As you move up the curve and the bonds become more equity like, you'll have equity income funds by inconvertibles. So along the curve, there are different pockets of liquidity, not just traditional convertible investor. And obviously as you go down to that left, Get into that distress part, you got that crossover credit and distress investor that comes through.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT
“And it really was until this recent pullback in 2020, right? This another mass explosion in issuance and issuers in the product. And with that, really, it just expanded the opportunity set. It got other participants in the market more interested in the product. The one thing I haven't mentioned with Converts, which is very different than, say, like loans and different types of securities that require different types of trading and different types of settlement converts a Q sub-traded bonds. And because their characteristics are so different, you do have transient investors. When we looked back at that curve that you showed, you have transient investors in this marketplace that based on those metrics will get involved. So as you get into that fixed income part of the curve, like you will have fixed income investors or fixed income mutual funds.”
2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT