YouSaid · the spoken record

Scott Goodwin

lines on the record: 87
first: 2023-06-13
most recent: 2023-06-13
sittings or episodes: 1
sources: podcast

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“And I was on the Royals and T-ball. So even though I was a Maddenley fan, I said to my dad, you know, we need to go to the Royals Yankees game. And it turned out that the year we went to this game, Bo Jackson was on the Royals and Deion Sanders was on the Yankees. And this is like one of the great Yankees games. You don't even remember this game. Bo's up, first three times up, home run, home run, home run. And this is in the Bow Nose era. Dion comes up. I think it's probably the fifth or sixth inning. Hits a sinking liner at Bow who's playing center field. Bow dives and separates his shoulder. Dion inside the park home run. Bow's injured has to walk off the field to the crowd chanting, you know, bono shit. I was just a sports nut and I got into baseball. I was cruising around reading the sporting news or one of the baseball weekly, these things I would get every week. And I see that there's something called Bill James Fantasy Baseball. You're an early baseball.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“The 94 Stanley Cup. Amazing. Matto, Matto, Mattau, being the devils, and then messier with the guarantee and winning the game. These are my formative moments.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“My dad worked at JPMorgan for 30 years. I was born in Paris, moved to the States when I was four, grew up in New York suburbs, lucky enough that my dad was in finance. That gave me a head start. There's no doubt about that. I'm a sports fanatic, Don Mattingley was my hero growing up. My dad and I went to Rangers games would go to Keene's chop house. We were there at the 94.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“We've tried in the hedge fund to be scaling it in a way that focuses on returns, not management fees. We'd return capital at the end of 2021. I think we'll probably return capital again at some time in the future because we want to size it to maximize returns and the scaleability issues are around capital markets and shorting. So we think about the scalability of those two areas. If we hadn't opened Europe, the London office last year, we would have had to shrink it from where it is now. But that's allowed. Europe has created a lot more capacity.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I was running the whole performing risk, and then my partner, John, ran research. So, sitting there trying to trade, especially the shorts, what was probably the biggest short book in single name credit globally, it went from being like, okay, we're betting on earnings announcements, we're betting on downgrades and upgrades, very specific things. Our short book is private equity style, it's becoming an index proxy with sector overlays because we're too big to change our mind if we're wrong. That 300 million position was liquid and tradable in 2012. Now it should be 50 or 60. So those changes were, frankly, much more apparent after the fact to me than at the time. But there's a real trade-off between management fees and returns. And I think part of the reason that LPs push back on some of the credit hedge funds and the performance in the teens was that they chose management fees and growth of AOM over returns.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“And there's a cost now for being illiquid. You can't get your money out of that venture fund, even maybe down 20% from your mark or that private equity fund down 20% from your mark or that 21 vintage private credit fund down 10%. You can't get out and go buy investment grade at 7% or high yield at 9% or some specific opportunity. So I think that's part of it.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think part of it is that particular group of people was very focused the past 10 or 15 years on equities and venture and private equity and that's worked for them returns been great and now maybe they're pivoting a little bit we've seen a lot more interest from that group if you think about the credit fund performance from say 2013 to 2018 maybe getting into 2019 pretty terrible right the distressed funds are doing coal and newspapers and shipping and bad energy bonds the returns are terrible I wouldn't have wanted to be in that space either. And some funds are getting too big, which really dilutes the alpha. If trading and speed create alpha, then size is almost naturally at some scale a detractor. So I think it's part of that where the returns were bad. There was no concept of a cost for getting illiquid. There was no stopouts. Every time there was a sell-off, the Fed would step in. Now you have an ARR where the Fed's a headwind.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“You're going to make mistakes, but you're doing it with a better margin of safety. So, yes, it's liquidity provision, but it's also doing it with speed. It's different for us to be able to make that decision in 10 or 15 minutes because we've already done the work. Whereas if they had called at one of our peers at that point in time, they get the junior trader who might talk to the senior trader, who might talk to the junior analyst, talk to the senior analyst, talk to the PM. And then when the PM's back on Thursday for investment committee, four days later, they'll talk about it. But they've missed it. There's so much drawdown capital out there that people are having to adapt their models to be a little more nimble. I mean, it's why we'll have an investment committee process for our private credit business. We have one for our CLO business that are a little bit slower moving. They're more primary based. But the hedge fund, the drawdown fund that John and I run every day that have to be focused on secondary markets as a lot of the opportunity, that speed of decision making is a real part of the alpha.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, if you look at the strategies that the pods will employ or other funds have employed in the past, it's not liquidity provision to every name. Providing liquidity as a mean reversion strategy, which some people have employed, eventually you're going to blow up because you're going to provide liquidity to something that doesn't mean revert. If you do it with a real knowledge of the underlying credits,”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because I think a lot of people understand the credits. Most of them are slow and reactionary. Having a process that allows for speed of decision making is alpha. There's no doubt about it. The example I gave you about the levered loan things is an extreme one in COVID, but happens every day.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“More long term liability type of money, there's still a lot of money in daily liquidity ETF mutual fund, that creates a lot of the intraday and intermonth volatility and credit because the underlying assets don't necessarily match the daily liability structure. I would say speed is something that when credit markets were much more liquid and the banks were taking a lot of risk when I was on the sell side. Call it 2002 to 2010 and maybe a little bit after that 11, 12, 13. There was more liquidity in the market that banks are committing a lot of capital speed wasn't as relevant because the bank traders were always the fastest. They were seeing everything going on. They knew what everyone was doing. As they became less focused on risk and knowing the names, frankly, and more focused on just moving widgets around from one account to another, the combination of understanding the underlying credits and being fast”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, these numbers are pretty incredible, but they were something like 90 to 1 levered on levered loans on LCDS, which is a product that doesn't exist anymore. As a secured, unsecured basis trade, they were gone in three days, basically. And that was a real lesson for me about gross and leverage in watching how quickly that unwound. And at City watching some of the mistakes that were made, there were real lessons to be learned in my career of frankly watching other people make mistakes and learning from them versus having to make them myself. But that source of alpha of liability structure is still around in credit today. I think it's much more appropriately distributed now. You have private credit funds have funding that matches the not only LP capital, but the leverage matches the duration of the assets. There are a lot of the CLO equity, which is a more volatile product from a mark-to-market perspective. Great product through a number of cycles, but maybe not for somebody who has quarterly liquidity. That now sits in different hands. More insurance, more pension.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“What is the best risk adjuster return? We're also far a hedge fund or dislocation fund thinking about what is the best liquidity adjusted return because most of the time you're not getting paid enough to go into illiquids if you have capital that's supposed to be doing liquid things. And 809 was a lot about holding the trade because if you were levered, so would was one of our biggest counterparties. 2007, the market goes down for like three days.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Early on, it was the liability side of the distress market. And that was the firms that were early in that that were excellent 20, 25 years ago that were early and in there and they knew the docs and other people didn't. That was a real source of alpha. I think that alpha in terms of just understanding the docs better than other people or having the information is gone. If you fast forward to the GFC, I think a lot of the alpha there was liability structure. Who could hold the trait? We were at City. We sold most of our levered loan book to a bunch of private equity guys and gave them back leverage. They had to re-up that leverage, but they were able to hold that trade from those loans going from 80 to 40 to par. And if I look at funds that were successful during that time period, it was those that could hold the trade or had liquid enough investments that they could change their mind. When we think about liquidity and investing, we're not just focused on”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“And that does create some level of busy work, but it's all about process and being prepared so that you can make fast decisions.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“350 with software loans. Let's say the average price on them the prior day was in the high 80s. We bid around 80, so down, say, 10% or 8 points. And they sold it to us. And I think there are probably two firms in the world that could have responded to that call within 15 minutes. And we responded, I think, within five. But they called us because, A, we had shared the list with them. And B, they knew we had a track record of providing liquidity into these dislocations and responding fast. So that speed of capital in that situation provided a lot of alpha. Two of the loans were sprint, which was getting bought by T-Mobile and Infor Lauchen, which was getting bought by the Koch family. So they were getting bought by investment grade companies. We were buying them in the lower mid 80s. Sprint was a little higher, but that opportunity, I think, exemplifies being ready, learning the name's proactively, not necessarily because there's investment to do today, but because you know when there's an inflection point, there's certain kind of things you want to buy.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm sending them an IB and then I'm also talking to them for each bank to sort of nuance the list a little bit, as are the traders on our team. And the head of loan trading at BFA calls me and says, hey, it's 7 a.m. I've got a mutual fund that's got a billion dollar outflow in loans. They're calling us because we have the fastest settlement process for loans. Okay. They own these names on your list. Can you buy 500 million by 8 a.m. because they want to make some progress? I call John. We're like, let's not buy cyclical stuff. We don't know what's going to happen here. We're starting to buy a little bit of IG because we think the government's going to start buying IG. But this is junk rated loans. And we had had our analyst in software learn all the software loans in 2019 because we said, well, if there's a recession and there's a cyclical environment, the whole loan market's going to trade down because that's where a lot of the excesses are building up. But software will be the most defensive place, stickier. So we bid that firm for 500 million of loans, of which three”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, sure. I'll give you an example from COVID. That's maybe the most interesting example the levered loan market is a market that is very opaque. 70% of the market is private issuers, which means there's no public stock you can file. You have to go on the interlink site to get the financials. And levered loans don't settle like stocks or bonds. It's mind-boggling, but levered loans settlement process could take anywhere from a week to months. Hopefully someday blockchain will fix that, but it hasn't yet. So we're sitting there in the second week of March and we share with the banks' names we're focused on. So I'm sharing with the banks each morning. Here are the names we're focused on. So they know if they get a seller of anything on that list, they should call me. We want to be transparent and open with them. Again, we're trying to make them smarter. We're housing that risk. They're looking to move it.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, we want our analysts, they are telecom analysts, is focused on level three right now in the distress space, to also be thinking about whatever's happening with ATT and Verizon and T-Mobile that might impact the distress telecom names. It's that full cycle investing within a sector being very sector-specialized on the research side and then product specialized on the trading side, I think allows you to make fast decisions because if you're not product specialized in trading and you're a tourist to say investment grade or you're a tourist to high yield or you're a tourist to distressed You're not necessarily going to get the call from the bank when there's that opportunity. If you're in the market every day, they're going to call you and our process for our hedge fund and our drawdown fund doesn't have an investment committee. John and I make all the decisions. We work together on them and his background is much more research restructuring legal mine is trading risk portfolio management. That comes together when we both love something. We can make fast decisions at those inflection points, but it's because we've vetted and we have a list.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Seconds, minutes. And I think that's something that my partner Jonathan and I really put together when we were building diameter was we want to develop a process. And we had built this at Anchorage, but we wanted to put it almost on steroids of how can we be a provider to liquidity into inflection points and markets, credits, and sectors. Because the banks aren't sitting there providing that liquidity anymore. They're intermediating in the middle. When there's a big seller or something, when there's an inflection point in accredit, a downgrade, an upgrade, an M&A event, a bankruptcy, any sort of event that causes a lot of trading, we don't want to be just starting our research then. And if you're just a distressed person that's reactionarily looking at what's in distress, you're going to be starting then. But if you're looking at the market every day, you're doing new issue. You're shorting. You have a CLO business that looks at new issue and knows all the loans, you're forced to think proactive and thematically.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Mentality. We're approaching it from a total return mentality. And if you want to approach an asset class that is carry-based from a total return mentality, that means you have to see where the ball is going. Most credit investors are rules-based. They have to buy this duration of bond or this rating of bond or this sector of bond. Most have daily liabilities. Most of the credit money is in structures away from private credit, in mutual funds or ETFs. Not most, but a decent amount of the credit money is in those structures that have to say 30 or 40 percent of the high-yield market, less the IG market, but have to leave, can leave at any day and loan, same thing, 30 to 40 percent. CLO is the rest of the loan market. If you can leave any day and you have an underlying market that is discontinuous liquidity over the counter market, you better be ready to make decisions quickly.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you'll hear, if you walk around the floor of diameter and we've got, I think, almost in the low 60s of people now going to 70 pretty soon, you'll hear know the names echoing through the walls and the halls. It literally means know the names. We're not kidding because credit is an asset class that is naturally very different than equities. It's a carry-based asset class. You get your coupon. Equity investors are looking for total return.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“A first quartile or a second quartile commodity company that trades down a lot in credit. It's a really unique opportunity because the commodities have such a high volatility factor associated with them. If they have enough runway that they can last 12 to 24 months, you're supposed to take a shot on that debt.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Worth $50, it might be worth zero. Now, what happened in the energy thing was you had all these bonds that went to trading at zero to 20 cents on the dollar. But some of them had a couple years of cash around and could fund their interest payments. He said, well, I can buy for five to ten cents. But I think about the best trades I saw in 08 and 09, it was people coming in and buying the LBO and secured debt. I was at the Broker Deal at City because there was a lot of option value at those bonds. Now we're sitting here at Anchorage and we've got, wow, there's some really interesting opportunities. These bonds are at 5, 10, 15 cents. So we try to figure out which ones had enough runway. And the same thing happened again in COVID. And you ended up buying what were IOs that were covered par because oil didn't stay at 20 or 30 bucks forever. It went back up eventually because supply and demand balances. And I think in commodities, you had the same thing in Freeport and some of the copper companies as well. When you have a commodity,”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, anyways, let's buy the Permian stuff at 70 and short this at 50. And that trade ended up making maybe 30 points on the long and 50 on the short. I wish we'd held it that whole time. In extremis, that's what it would have made. But you had multiple bites at the Apple and fits and starts in that credit cycle and usually do. Rarely do you go like COVID from A to Z in one month. Credit cycles are, and the one we're about to talk about the post-COVID cycle that we're about to enter now is it's a slow moving cycle, much more like the 02030405, what I went through at the beginning of my career, which was a buildup of excess in certain sectors driven by some economic shifts and changes in the interest rate environment that led to a cycle. The things in 2011 and 2012 systemic, GFC, systemic, energy, not systemic, but commodity price. If you have a bond that's at par that works at $70 oil, all of a sudden oil is at $20, it doesn't work. It's not that the bonds”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Dispersion, high correlation. People are selling what they can sell. That creates tremendous opportunities because in that first wave, things will go down that probably shouldn't have gone down at all. And you can buy those and short the bad stuff. So we looked at that first sell off in 2014 and you had the Permian credits, many of which have now been rolled up, the parsley's, the crown rocks, the diamondbacks had gone from par to 70 cents on the dollar. The Mississippi line, which is a worse basin, the sand ridges and the offshore credits had gone from, say, part of 50. The distress funds are all looking at this stuff at 50. They're heuristically saying, I have to buy the lowest dollar price. That's what I've been trained to do. And they're generalists generally. They don't have sector specialists, so that's changing because of some of the mistakes made in the teens. But they're drawn to that low dollar price. We're sitting there saying, wow, this stuff in the Permian's covered at par, even if oil is at $30 or $40. Whereas the Mississippi lime stuff, we didn't.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Real credit cycle sector driven, like I was talking about. So there's a ton of new issuance in energy. The shale boom is being built up over many years. I remember meeting with Aubrey McClendin from Chesapeake in 2003 or 2004 at City in a roadshow. And he showed us a chart. I think they issued the Chesapeake Nines that year, the nines of like 08 or 09. And he showed us a chart of where natural gas was going to go. And I don't think it saw that target for a long time. But that was the beginnings of it, like in the early 2000s at Anchorage in 2010, 11, and 12, we were financing companies in the Bakken, the Marcellus, the Mississippi Lime, the Permian. We knew all these basins. And you start to have these high correlation sell-offs, that's one characteristic of credit cycles is whether it's a sector-based cycle or it's a macro cycle, the beginning sell-off in credit is zero.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“And I joined them coming out of the GFC cycle. But then soon after that, we had a cycle in Europe. I got there, I think, in May of 2010. And all of a sudden, Greece was exploding. Frankly, the learnings from the European sovereign cycle were very relevant to what happened during COVID because it was the first time in my career that you had seen real intervention by sovereign corporate debt markets, buying a lot of debt and support in the market. So you had in 20, in Drahi, whatever it takes, they're going to buy Italian bonds, buy Spanish bonds. Eventually they ran out of those bonds to buy. They bought corporate bonds with the CSPP program and then distorted the corporate bond market in Europe for a long time, which allowed RITs to issue at 1%. That's going to now create a good distressed opportunity. But what we saw then was whatever it takes, intervention works in investment grade and corporate bonds. 2015, 16, 17 is the energy and commodity bust.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Ton of leverage built up in the system very quickly, chasing a private equity boom. You had a housing bust that took the economy down, that took those deals down as well. So those companies weren't actually the problem. It was the housing bus that took the economy down that caused them to have a problem. That was another very fast V for a lot of those companies. I was at City and then left in 2010 to go to Anchorage. But I'm at City. My mentors, Jim, John Eckerson, Ronnie Mateo had all left. They're gone. I'm kind of there by myself with a few people who are left moving the deck chairs around, watching the stock be at a dollar. And frankly, learning from my clients. One of the reasons I went to Anchorage was I had a lot of the same shorts as the Anchorage guys in 08. And we worked to turn them into longs in 09. A lot of my career has been about finding shorts, then getting long the other side and following these credits through the cycle. And I liked how Kevin and Tony and the anchors team did that. So they asked me to join in 2010.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“That was a bubble built up largely in the high yield market, tradable bonds, investment grade market, power, telecom, and fraud were the main parts of that credit cycle. There was a huge amount of money to be made in distress because you had mutual funds that with the bonds were default or they downgraded and they sell them to the stressed guys. And there wasn't as much competition for those people in distress. And the liability side of the balance sheet we talked about, those people had real edge go to the courthouse. They would have lawyers. They would know exactly what was going on. That liability side edge, because of the advent of reorg research and everybody having a doc person on staff, has largely been competed away within the credit universe. That's the first cycle I was a part of. Then we get to the LBO boom and bust. So if you think about LBOs and probably 40% of high yield issuance was driven for LBOs in 2007, I don't think we've seen that number since then. And there was a...”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“The energy thing in 2016 is the best example of that. If I unpack that and go back, I started at Solomon City in 2002 working for Jim Zelter and what kind of the learnings were from him early on, it was there are A lot of companies that need money right now for project finance and telecom and power. That's what's been built up. And there was a series of”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when we think about credit cycles, we think of Booms in Boston business, booms in bust in the economy, associated with companies that are either cyclical, that have a problem due to an economic change. So in COVID, that meant rental car companies and cruises and airlines that literally couldn't perform their business. Their balance sheets were fine one day and not fine the next day. And then you have another type of credit cycle, which is more driven by secular change. Amazon killing all the retailers over the past 10 years. For us, credit cycles aren't just 02, 07, 08, and COVID. There are a series of microcycles going on all the time in different sectors.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“That example is a finance company that was doing really well when rates were zero and people believed in a huge TAM. Now people realize that rates are not going to be zero forever. So their finance business effectively subprime finance business isn't earning as much as it was. The TAM isn't what it was. And they're just not that good at selling used cars. But I think you go into bubbles and the Fed inflates and deflates them. And the one we're on the precipice of deflating right now or in the process of beginning to deflate, driven by tech, healthcare venture, private equity and zero rates and private credit. It's all zero rates. Where can I put my money where there's convexity? When there's no yield, people hunt for other ways to get convexity or optionality.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, how many widgets does this company make? How many PCs does this company make? But then there's liability side of the balance sheet that the equity universe, frankly, misses a lot. I think they're learning about it again now a little bit. Thinking about what Carvana or companies like that have gone through, you're seeing the liability side start to matter more. But what's the debt structure? When are the maturities? What are the covenants? What assets can the company sell? What can they not sell? Can they move assets around? So that liability structure and sort of the unholy acts that can be done by creditors or to creditors Is something that we like to meld into our process.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“Nobody's working to be for me because they did not offer me a job. I think for me, I'm naturally skeptical. And in credit, you're always thinking about how much can I lose? Am I going to get my principal back? Am I going to get my interest payments? Or as I think about the smart equity investors I know who have the last 10 years made a lot more money than I have because they've been thinking about the upside. How can earnings or revenue for this business double, triple, quadruple? So that difference of thinking about downside versus thinking about upside is very fundamental. And then when you think about credit investing, you have the asset side of the balance sheet, which the equity guys are focused on.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“You're sitting there as a pension and you have a 7% bogey or 8% bogey and your equities are at all time highs and now you feel like now I'm funded. I'm going to start to rotate into investor grade corporate debt. You can buy 30-year investment grade corporate debt now yielding five and a half to seven percent depending on the credit quality. And that starts to be a meaningful defeasement of your liability relative to equities that might have more convexity, but you don't need that convexity anymore because you can defease your liability. Those decisions take time to get made. You also have the other side of it, which is a company just has too much debt has been zombified by COVID. Maybe there's too much debt on the capital structure. But because rates were so low during COVID, the coupons are low. They've got maturities in 27, 28, 29. The bonds are trading at 60 cents on the dollar, 70 cents on the dollar. They're not defaulting tomorrow. But the creditors are essentially the equity. And eventually there's going to be that transfer of value back to the creditors. So those are two.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source
“If I look at the 2010s, it's all about private equity shareholders, return of capital, dividends, zero rates. Now you're in your environment driven by inflation, higher rates, likely return of that capital to lenders, pensioners, savers, creditors who are robbed of it in the Tens. You have this transition back that takes a long time. That's the theme that I like investing behind for the 2020s, which is exciting from a credit perspective because we're yield investors and credit investors, we haven't had that opportunity really since 2008.”
2023-06-13 · Invest Like the Best · Scott Goodwin - Know The Names - [Invest Like the Best, EP.332] · IDENTIFIED FROM THE TRANSCRIPT · source