Trustnet Magazine Issue 10 September 2015 | Page 4

MONEY

BLACK SWANS

2

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CORPORATE BONDS?

It is clear the seeds of the next
black swan event are often sown
in the solutions to the previous
one. The regulation that moved
investment banks away from
corporate bond market-making has
had the unintended consequence of
decimating liquidity.
As such, the bond market is
the obvious place to hunt for the
next crisis. Jane says the sector is
riddled with uncomfortable pricing
anomalies. He points to parts of
the distressed debt market, where
investors are receiving a poor return
for lending to high-risk companies.
But this is speculation: Parry
points out the Fed balance sheet is
now 77-times leveraged – another
potential black swan in the
making? It will only be obvious in
hindsight.

PERFORMANCE OF INDEX SINCE PEAK
10%
0%
-10%

Nikkei 225 in GB (-41.08%)

-20%
-30%
-40%
-50%
-60%
-70%
Jan 14

Jan 11

-80%
Jan 08

It might have been easy to predict
the Thai bhat devaluation in 1997,
but no one foresaw the ensuing
capital exodus