Tech Worries Pressure Stocks

Is this the beginning? Have we reached the high of the markets? Aivars Lode

A slump in technology and internet stocks accelerated Friday, putting the S&P 500 in danger of joining the Nasdaq Composite in correction territory, as investors continued an October retreat from risky assets.

Managers see increased credit defaults in next 12 months, survey finds

More news on issues with Bonds, Credit Defaults and Retirement Funds not being able to fund. When do we reach the tipping point?   Aivars Lode

Credit portfolio managers forecast rising credit defaults in the next 12 months and are split as to whether credit spreads will widen or remain the same over the next three months, said a third-quarter survey from the International Association of Credit Portfolio Managers.

In the survey, 58% of credit portfolio managers forecast that average corporate credit default rates will go up during the next 12 months, while 34% said they will remain unchanged and 8% said defaults will go down.

When asked whether North American credit spreads will widen or tighten over the next three months, only 8% of respondents said they expected spreads to tighten, but the result was split otherwise, with 47% believing spreads will not change and 44% believe spreads with widen.

Debt Likely To Be ‘Ground Zero’ In Next Financial Crisis, Says Oaktree's Marks

Over-leveraged deals and PE returns that will not be there .... both likely to be Ground Zero as previously discussed. Aivars Lode

Now is the time to adopt a cautious investment strategy as the market cycle ages, though there aren’t signs of an impending U.S. recession, according to Oaktree Capital Group LLC’s Howard Marks.

The world’s largest economy is still doing “very well,” Marks, chairman and co-founder of one of the world’s largest alternative and distressed investment firms, told Bloomberg TV in Sydney on Monday. Despite a lack of bargains in many markets, strategies should focus on remaining invested and position defensively, without piling into cash, he said.

“Our economy is still doing very well,” said Marks. “In a few months it will become the longest recovery in history. I don’t believe there are signs of recession anytime soon."

Marks has warned his investors previously that debt is likely to be “ground zero” in the next financial crisis, with too much money on the hunt for too few deals. The leveraged loan market, which has overtaken high-yield bonds as the go-to-financing source for speculative grade companies, is a particular source of concern for both Marks and central bankers.

The billionaire investor said it’s impossible to predict how long the economic expansion and the bull run in U.S. stocks will last, though he believes the market is in the tail end of a cycle.

“Nothing is cheap in our markets and most things are between the high side of fair or the beginning of rich,” he said. However, there are no risks comparable in scale to those on the eve of the financial crisis, he said.

Right now, holding a defensive positioning, while not bailing out of investments completely, is the best approach, he suggested. “We are endeavoring to be fully invested, but we are doing it with caution,” Marks said. “We are not going to cash.”

Marks co-founded Los Angeles-based Oaktree in 1995. The firm had $122 billion in assets under management as of June 30.

This article was provided by Bloomberg News.