China is poised to create a microcycle in chemicals by moving up the value chain to compete on quality, not just cost. This will create massive overcapacity and upend a global industry that seems unprepared for the coming upheaval.
With fewer traditional credit cycles, the most fertile ground for distressed investing lies in industry-specific downturns caused by technological or policy shifts. These "microcycles" offer opportunities to invest in good companies working through temporary, concentrated disruption.
A Collateralized Loan Obligation (CLO) business is more than a standalone P&L. It serves as an indispensable intelligence-gathering tool, providing a complete, real-time view of the syndicated loan market that is critical for informing hedge fund and dislocation strategies.
Instead of focusing on vague metrics like management or margins, the primary measure of a "good business" should be its fundamental return on invested capital (ROIC). This first-principles, quantitative approach is the foundation for sound credit underwriting, especially in illiquid deals.
Drawing on personal experience, Jonathan Lewinsohn argues that office politics are "deadly" to organizations. He was a better investor when he could focus solely on investing, not internal positioning. A flat, transparent structure is a competitive advantage that eliminates this drag.
Applying Bill Simmons' "overrated/underrated" framework, Jonathan Lewinsohn argues direct lending, once overhyped, is now so feared that it has become underrated. The current narrative overlooks its fundamental strengths for borrowers, lenders, and allocators, creating an opportunity.
Fixed wireless, which is rapidly taking broadband market share, is a "transitionary technology." This sets up the next telecom microcycle, where carriers will ultimately want to shift these customers to newly laid fiber, freeing up valuable wireless spectrum for AI and other applications.
In the cutthroat world of distressed debt, having a reputation as a frequent and fair "repeat player" is a key asset. Other creditors are more likely to collaborate and less likely to act opportunistically if they know they will encounter your firm again, leading to better resolutions.
Software, once a defensive haven for credit investors, faces a major threat from AI. AI's ability to standardize data and workflows could disrupt legacy SaaS companies, making the 30% of direct lending portfolios concentrated in software a significant, overlooked risk.
The high demand for safe, private investment-grade assets from insurers creates a "muffin top." The leftover, riskier junior tranche—the "stump"—is often sold into special situations and interval funds, concentrating risk in places investors might not expect.
In credit, contracts are king, unlike equity's fiduciary duties. Historically, unspoken norms prevented creditors from exploiting every loophole. These norms have eroded, leading to more "creditor violence" and making cooperative agreements between lenders an essential defensive tactic.
The US housing market is frozen not by insolvency but because homeowners are locked into low mortgage rates. With transactions at crisis-era lows but driven by non-discretionary events like death and divorce, pent-up demand creates a "coiled spring" scenario for when rates ease.