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January 2021 | Issue 230
Opinion Credit derivatives
Cessation of activity mid-December is an opportunity to switch off… and let the mind wander
I have decided to drop my usual ‘bah humbug’ line and end 2020 on a positive message, rather than mulling too heavily on the challenges ahead. The roll out of covid vaccines, the prospect of spending time with loved ones and having gotten through the past nine months are ample reasons to be thankful, but the biggest grace is how quiet things are suddenly.
For context, I write this only a short time before a corpulent, jovial fellow is due to fly across Europe’s wintry skies carrying a long list of children’s requests and a promise to deliver good cheer. Yes, you know the post-Brexit deal discussions have gone awry when Boris Johnson is required in Brussels.
With less time left for the UK and EU to forge an agreement than it takes to prepare an oven-ready mince pie, Brexit is the main Grinch (as Creditflux went to press) threatening to upset Europe’s serene run-in. For the whole gallimaufry of the past four years to end in disaster would be absurd, but not entirely unexpected.
In my last column, I countenanced the possibility that election fraud claims would stoke US uncertainty and unrest beyond the 3 November poll. But even in my most outlandish imaginings I didn’t foresee the lone US Grinch still campaigning on inauguration day — now a definite prospect.
These caveats aside, my best-case assumption is that most people in the market were able to shut up shop a little early in 2020. The positives of that cannot be overstated.
Cessation of activity in mid-December brings the best opportunity to switch off and refocus in ages. It’s easy to forget, but in December 2019 everybody and their dog chased a late rally up until the last. December 2018 was far from tranquil for the opposite reason.
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Welshcake is grateful for a lull in credit markets. The downtime has inspired him to dream up a CLO play
Spare time to read…
Here’s wishing all of you a relaxing transition to 2021 and a spell of rehumanisation to face January fully prepared. Outside of re-watching The Muppet Christmas Carol, I will use the time to reconnect with my roots. In her must-read book, The Matter of Wales, the late great Jan Morris described the Celts as “warlike, artistic, quarrelsome, ill-organised, showy, flighty, witty, headstrong”. So expect that in spades in 2021.
I’m half expecting a Diego Maradona biography in my Christmas stocking, given how much I’ve banged on about the departed legend’s exploits. Maradona scored his first career goals in Patagonia, where Welsh farmers have maintained the successful Y Wladfa enclave since 1865. Not for no reason did five-piece band Hogia’r Wyddfa pour out the praises via Mariachi in their 1980s chart-dodger Maradona. He’s a hero to the Welsh and Scottish. I like to imagine the male voice choir were singing Myfanwy on the Mumbles Pier in 1986 when Maradona followed up his ‘llaw duw’ with the goal of the century against England. I’m not biased of course. As the saying goes, I don’t care who beats the Saes.
…and time to write
A window for writing also arises. Spared by Creditflux’s editors until late January, I’m undertaking a re-examination of the story of A Christmas Carol for a CLO audience.
In outline so far, a litigious manager gets spooked by the apparition of a former colleague, who brandishes his lengthy chain of ongoing lawsuits. “Imagine how long your chain is!” moans the spectre, before warning Scrooge he will be visited by three ghosts of CLOs past, present and future.
Duly these arrive in turn, with the first showing Scrooge the happiness of his youth on the day he learned the joy of suing someone. Next he witnesses the plight of recent employee Bob Cratchit, so hamstrung by lawsuits he can’t provide for his investors. The final ghost presents Scrooge with the nightmare vision of a CLO portfolio comprising only lawsuits, followed by a gravestone that just says: “See you in court”.
“No more, spirit!” wails Scrooge. “I have seen enough!” Whereupon he awakes a reformed CLO manager and vows to settle all claims. Scrooge calls to a boy in the street and tells him to go buy Cratchit and his family a package holiday.
“God bless us everyone!” says Tiny Tim to end the story, eating a double scoop of ice cream in the Channel Islands.
Global credit funds & CLO's
January 2021
| Issue 230
Published in London & New York.
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