The Overvalued Junk-Bond Market Still Has Pockets of Opportunity

Stansberry Investor Hour

Stansberry Research

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4.4 • 677 Ratings

🗓️ 11 November 2024

⏱️ 54 minutes

🔗️ Recording | iTunes | RSS

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Summary

On this week's Stansberry Investor Hour, Dan and Corey welcome Martin "Marty" Fridson
back to the show. Marty is an author and expert in the field of high-yield bond investing. He
is also a senior analyst at Porter & Co.'s Distressed Investing newsletter.

Marty kicks off the show by discussing the top-down view of the high-yield market. He
comments that right now, there is a very small risk premium. Marty breaks down the factors
that he uses in his model of fair value and concludes that the high-yield market is extremely
overvalued. At the same time, the market is forecasting a higher default rate than credit-
ratings agency Moody's. Marty also gives his opinion on whether we'll see a recession, what
it means that the inverted yield curve has not yet resulted in a recession, and why he's less
critical of the Federal Reserve than other investors. (1:39)

Next, Marty explains that the current situation of the federal-funds rate and the 10-year U.S.
Treasury yield moving in opposite directions is not rare. He says it happens 40% of the time.
This segues to a discussion about what's happening with the junk-bond market... including
companies potentially having to roll over their debt to higher rates... and private credit
lenders now competing with high-yield bond buyers. Marty then names which sectors
present attractive buying opportunities today. (18:03)

Finally, Marty goes further in depth about his quantitative model and what data it draws
upon to find attractively priced distressed debt. He then explains that because high-yield
bonds aren't very liquid, exchange-traded funds centered around these investments tend to
have a lot of variance in performance. This can have serious consequences in times of
extreme market disruption. (34:12)

Transcript

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0:00.0	Hello and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research. And I'm Corey McLaughlin, editor of the Stansberry Daily Digest. Today we talk with legendary high-yield bond investor Marty Fridson. Yeah, Marty is an old friend, and he is, how do we say? For decades now, he's been
0:23.3	known as the Dean of High-Yeal Investing. He's my go-to source about high-yield bonds and rates
0:31.5	and bonds generally. So let's do it. Let's talk with Marty Fridson. Let's do it right now.
0:46.9	For the last 25 years, Dan Ferris has predicted nearly every financial and political crisis in America,
0:51.7	including the collapse of Lehman Brothers in 2008 and the peak of the NASDAQ in 2021.
0:57.1	Now he has a new major announcement about a crisis that could soon threaten the U.S. economy and can soon bankrupt millions of citizens.
1:00.3	As he puts it, there is something happening in this country, something much bigger than you may yet realize,
1:05.7	and millions are about to be blindsided unless they take the right steps now.
1:10.1	Find out what's coming and how to protect your
1:12.1	portfolio by going to www.com and sign up for this free report. The last time the U.S. economy
1:20.4	looked like this, stocks didn't move for 16 years, and many investors lost 80% of their wealth.
1:26.8	Learn the steps you can take right away to protect and potentially grow your holdings many
1:30.8	times over at www.american darkday.com.
1:40.0	Marty, welcome back to the show. It's always good to see you.
1:43.1	Yeah, great to be here. Nice to see you.
1:46.4	It's been a while. It's been four years since 2020, August of 2020 since you were here. A lot's
1:52.3	happened since then. The world's kind of turned upside down since then. Say the least, yeah.
1:59.6	All right, Marty, I got a tweet for you i just i just put this out
2:04.1	less than an hour ago and i put i put a link to the i ceb of a high yield index option adjusted
2:12.4	spread from the federal reserve um educational website there.
2:18.7	And it indicates that at 2.73, 273 basis points,
2:25.7	that's the second lowest going back to September of 1997.
	...

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