저자: HowardMarks · 외국인
요약 보기
하이일드(B등급) 채권은 생존하면 상방 서프라이즈만 남아 5% 금리도 손실 위험이 낮다고 주장. 재투자수익률 중요성 강조. 위험은 낮은 품질이 아니라 모두가 위험하다고 믿을 때 가격이 낮아져 안전해지며, 신용등급은 틀리는 것이 역할이라고 비판. 2007년 AAA 모기지 1.6만 건 사례 언급.
다듬은 글
If you buy B-rated bonds and they survive, then all the surprises will be on the upside. If they survive are still the three keywords. Here Moody's was saying that a B-rated bond is a bad investment. Well, what about it 75 cents on the dollar? What about a 50? What about a 25? Is there no price? Most people believe that the things that everybody think are risky are risky.
I think the things that everybody thinks are risky are safe because their aversion to it forces down the price to the point where it is safe. What is the role of the rating agency? The role of the rating agency is to be wrong. Because it gives us something to game against. After the uh Nifty 50 thing didn't work out so well, uh is when I transferred to money management at Citibank from research and I was put in the bond department.
They wanted to keep me away from stocks. And uh I got a call in August of uh '78 and they said there's some guy named Milken or something out in California and he deals with high-yield bonds. Can you figure out what that is? And the world didn't know. Uh and so, uh you know, I met with Mike and he explained to me that if you buy B-rated bonds and they survive, then all the surprises will be on the upside.
If they survive are still the set the three keywords. And uh if you buy high-yield bonds today at their paltry yield of 5% and they survive, you'll make 5%. And well, you could get some upside, right? They could be acquired by a double A to A. Some good things could happen. And in fact, uh you know, the most people are terrified of rising interest rates uh because they cuz it depresses the price of a bond temporarily, but if the credit is good, it still goes back to par when you get paid off and in the meantime, the coupons are reinvested at a higher rate than you anticipated so it's really not bad news.
So, you could do a little better than five if they survive. And the point is that nobody ever went broke making 5%. So, you you could uh wish you had more, but if if it turns out if high-yield bonds today turn out to have been a mistake and I know there's been discussion at this conference of whether it is a mistake, it's not going to be a big mistake.
It's not going to be a fatal mistake. Uh and what you have to be aware of in the investment business is what carries you out. And it's not going to be creditworthy bonds that you bought at a 5% yield. In many ways, if you buy a long-term asset, it's really not the coupon on the bond, it's the reinvestment rate that's the key.
And when interest rates spiked in 1974, insurance companies like Equitable Life Insurance Company and others wrote annuities where they were guaranteeing rates for long period of time so you could compound your money. As interest rates dropped precipitously by 1977, they could no longer reinvest their money at the rates they were guaranteed and they had a lot of economic challenges and eventually were acquired and and merged.
And you I'd like you to go into that reinvestment rate a little bit now if you could. Well, it's it's really I mean, you have to be a bondo. You have to be a bond person to understand this. Now, have you trademarked that name bondo? But but uh But the the Everybody knows that when you buy bonds, you get the promised return through the coupon.
And everybody knows that if you buy them at a price different from par and they pay, they converge to par. And that those are two dependable sources of return. But most people who aren't bond specialists don't understand the importance of the interest on interest. And if you look at a long-term bond like a 30-year bond, most of the return at the end of the day will not come from the interest or from the appreciation to par, but from the interest on the interest.
So, clearly the then it's a key moving part in the equation and the question is what interest rate do you reinvest the interest at? And when you buy a bond at a at a stated yield to maturity, the calculation assumes that the reinvestment will be at the the quoted yield to maturity, but it doesn't have to be.
And the truth is that whereas people are petrified to see uh bond rates rise as I said before because it depresses the the price in the interim, it does facilitate reinvestment of the coupon at higher than expected rates of return. So, it is it is actually a boon. And the probability that you're going to be able to reinvest the money at that exact rate is extremely low, very close to zero.
it's a somewhat illusory uh calculation. Most people equate risk with low-quality assets and safety with high-quality assets. And they still do. I mentioned the Nifty 50, high quality. People thought you know, there's an there's an old saying, you can't get hurt buying IBM and we documented you lost 80 to 90% of your money.
On the other hand, what about low quality? Is that a source of of risk? Uh you know, when I got started in high-yield bonds back in '78, I looked up in Moody's, what does it mean to be single B? And Moody's defined a single B bond as follows, quote, fails to possess the characteristics of a desirable investment.
In other words, low-quality asset can't be a good investment. Well, is there no price at which a low-quality asset becomes a good investment? You know, if if if we went out after this session to the parking lot and and I said to you, I'd like to sell you my car, would you like to buy it? And let's say you like my car and you have money and you need a car.
Hopefully, there's one question you would ask me before saying yes and that's what's the price. And here Moody's was saying that a B-rated bond is a bad investment. Well, what about it 75 cents on the dollar? What about a 50? What about a 25? Is there no price? And so, this is the kind of herd error that you can take advantage of.
So, risk is not quality. And um you know, most people believe that as something is rising in uh price, it's that means that people think more better of it, it's less risky. Well, I think that when something rises in price, it becomes more risky. Most people believe that the things that everybody think are risky are risky.
I think the things that everybody thinks are risky are safe because their aversion to it forces down the price to the point where it is safe and potentially lucrative. What is the most the riskiest thing in the world? Is the belief that there's no risk. Risk is perverse. That's the important thing that what that's what the the chapter in the book talks about is the it's the perversity of risk.
And it's the belief like in '07, the belief that there was no risk is what made the world risky. And in late '08 after Lehman Brothers melted down, the belief that there was no potential future is what created a great potential future. The rating agencies keep the same rating on a security whether it's a 100 or 25.
[clears throat] It might be a triple A at Right. at 25, it might be a single A at 50. And by the way, the rating agency you know, we should we should you and I should have a word for the rating agencies. I was once I was speaking at Wharton one time and somebody said to me, what is the role of the rating agencies in this process?
I said well, the role of the rating agencies is to be wrong. Because it gives us something to game against, you know? Uh I don't know how many people in this room know how many corporations are rated triple A today, but the answer is four. How many mortgage obligations were rated triple A in the in the mortgage wave?
Mike tells me 16,000. I believe him. So, is it possible that after 100 years of economic history, our our economy only created four triple A rated companies, but in a few years, Wall Street was able to create 16,000 triple A rated mortgage obligations? And it was probably the greatest uh opportunity to make money in a lifetime in a short period. Right.
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