A New Disturbance in the Force

CLOs, again?! Didn’t they learn after 2006-2008?

A high-stakes trade in the riskiest corner of a $1.3 trillion credit market is enticing the most conservative investors, raising concerns that—in their aggressive hunt for higher yields—they may be courting disaster. Pension plans and insurers have been piling into funds that invest in equity tranches of collateralized loan obligations in recent months. The inflows have helped a slew of hedge funds and other money managers raise at least $3.1 billion in less than a year for strategies solely dedicated to these investments. CLO equity—a small slice of the resurgent market for CLOs that bundle leveraged loans into bonds with varying safety ratings—is actually a form of deeply subordinated debt. It’s highly risky because it’s last in line to receive payments and the first to take any loss. Yet it has an appeal because of its greater claim to profits. While investors have typically included other hedge funds, family offices and sovereign wealth funds, the prospect of higher yields is now luring more money that’s been traditionally risk-averse. The recent increase in demand from pension funds adds a potentially large buyer to the mix. David E. Rovella

(Bloomberg, paywall)

Yikes !
Isn’t there some law that prevents them from investing in this type of instrument ?
Would really hate to see pensioners get bit
by this …but I guess there is the PBGC
as fall back.

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Andertoons by Mark Anderson for May 14, 2024

Andertoons Comic Strip for May 14, 2024

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Fraud — It’s Everywhere !

Fake studies have flooded the publishers of top scientific journals, leading to thousands of retractions and millions of dollars in lost revenue. The biggest hit has come to Wiley, a 217-year-old publisher based in Hoboken, N.J., which Tuesday will announce that it is closing 19 journals, some of which were infected by large-scale research fraud.

In the past two years, Wiley has retracted more than 11,300 papers that appeared compromised, according to a spokesperson, and closed four journals. It isn’t alone: At least two other publishers have retracted hundreds of suspect papers each. Several others have pulled smaller clusters of bad papers.

Although this large-scale fraud represents a small percentage of submissions to journals, it threatens the legitimacy of the nearly $30 billion academic publishing industry and the credibility of science as a whole.

The discovery of nearly 900 fraudulent papers in 2022 at IOP Publishing, a physical sciences publisher, was a turning point for the nonprofit. “That really crystallized for us, everybody internally, everybody involved with the business,” said Kim Eggleton, head of peer review and research integrity at the publisher. “This is a real threat.” . . . World-over, scientists are under pressure to publish in peer-reviewed journals—sometimes to win grants, other times as conditions for promotions. Researchers say this motivates people to cheat the system. Many journals charge a fee to authors to publish in them.


(WSJ, paywall, bold added)

Looks like the old saying, “Don’t believe everything you read”, still holds true. Even when it comes to “experts and reputable journals/sources”. Also if the authors are paying to have their research placed in these journals then are the journals themselves really vetting any of this? Its a revenue stream for them.


It’s the whole circle of the business model instead of being a proper clearing house. Scientists need to be published to win grants, be promoted, etc. That increases incentives to cheat on their level. The journals need the fees so that discourages proper vetting, and no one cares until they’re caught.

The only thing that could make this more peak late stage capitalism in action would be if we find out later that KKR, Apollo, or some other private equity firm was involved.

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The 19 journals were all previously owned by Hindawi, an Egyptian publishing company with a portfolio of about 250 journals that Wiley purchased in 2021. A Wiley spokesperson acknowledged that some of the journals had been impacted by fraudulent studies, but attributed the closures to other factors, such as low submission rates.


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Yeah, corporate greed isn’t driving inflation. That’s especially true in cyclical industries driven by global commodity markets (e.g. oil and gas).

On that note, no one has mentioned inflation since it was announced it ticked down last month which is great news. Markets loved it too.

So there’s no more inflation? Good to know

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Lol, reading comprehension is lacking in that one. I said nothing close to that.


Sarcasm comprehension is lacking in that one

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Interesting bit at the end of the article…

…Last year, the Federal Reserve Bank of Kansas City found that corporate profits contributed 41% to inflation during the first two years of the Covid recovery.

However, that same Kansas City Fed paper noted that this is not unusual and corporate profits contributed even more (59% on average) to inflation during prior economic recoveries…”

Looks like corporate profits typically have significant impact on inflation / disinflation during recoveries, if I’m reading correctly


If it always happens and is currently happening less, there isn’t much to talk about.

I mean, corporations are going to make profits. That’s why they exist. They are going to make more when the economy is good too. The flip side is also true.

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How many businesses went out of business during covid? Lots. Can’t blame a corporation for trying to build up their war chests to survive.

Rent, grocery prices, gasoline prices, interest rates.

A large number of Americans live paycheck to paycheck. They are taking on water.

In comparison to the G20, US is about in the middle band.
Rent and services really standout.

Components Last Unit Reference
Core Inflation Rate YoY 3.60 percent Apr 2024
Energy Inflation 2.60 Percent Apr 2024
Food Inflation 2.20 percent Apr 2024
Rent Inflation 5.50 percent Apr 2024
Services Inflation 5.30 Percent Apr 2024
Country Last Previous Reference Unit
Argentina 289 288 Apr/24 %
Australia 3.6 4.1 Mar/24 %
Brazil 3.69 3.93 Apr/24 %
Canada 2.9 2.8 Mar/24 %
China 0.3 0.1 Apr/24 %
Euro Area 2.4 2.4 Apr/24 %
France 2.2 2.3 Apr/24 %
Germany 2.2 2.2 Apr/24 %
India 4.83 4.85 Apr/24 %
Indonesia 3 3.05 Apr/24 %
Italy 0.8 1.2 Apr/24 %
Japan 2.7 2.8 Mar/24 %
Mexico 4.65 4.42 Apr/24 %
Netherlands 2.7 3.1 Apr/24 %
Russia 7.7 7.7 Mar/24 %
Saudi Arabia 1.6 1.6 Apr/24 %
Singapore 2.7 3.4 Mar/24 %
South Africa 5.3 5.6 Mar/24 %
South Korea 2.9 3.1 Apr/24 %
Spain 3.3 3.2 Apr/24 %
Switzerland 1.4 1 Apr/24 %
Turkey 69.8 68.5 Apr/24 %
United Kingdom 3.2 3.4 Mar/24 %
United States 3.4 3.5 Apr/24 %

It always starts from the bottom and up.