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Ken Moelis Worries About the Economy Having to Cover Leverage

Feb.16 -- Ken Moelis, founder, chairman, and chief executive officer at Moelis & Co., discusses his concerns about leverage in the current market. He speaks on "Bloomberg Markets."

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  • Tencent-Backed WeDoctor’s Hong Kong IPO Looms With Valuation Near $7 Billion

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The South African rand, Turkish lira and Mexican peso led the drop in emerging markets, falling at least 2%.The impact of lockstep moves in bonds and stocks can be seen in sophisticated portfolio strategies such as risk parity, which try to balance exposure across assets, according to Wells Fargo Investment Institute. The $1.2 billion The RPAR Risk Parity exchange-traded fund (ticker RPAR) dropped as much as 2.7% -- its biggest decline since March 18, 2020, in the height of the pandemic rout.“Right now those rates are increasing at a pace that may be unsettling to strategies such as risk parity, and the fixed income volatility is spilling over into other assets,” said Sameer Samana, Wells Fargo Investment Institute’s senior global market strategist. “Until the speed at which rates are rising slows, we may need to mentally prepare ourselves for more days like this.”Breakeven inflation rates -- bond trader projections for where they see annual consumer price inflation averaging over the decade -- are at multiyear peaks. 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Powell told the Senate Banking Committee Tuesday that the recent run-up in bond yields that has unsettled the stock market “a statement of confidence” in a robust economic outlook.On Thursday, as bond yields were exploding, Atlanta Fed President Raphael Bostic said “the economy can run pretty hot without seeing significant spikes in inflation.”While that may be true, financial markets are relentlessly forward looking -- and see the risks that come with a potential overheating. For now, the most obvious manifestation of that is the bond-market selloff, with investment firms including BlackRock Inc.’s research arm and Aberdeen Standard Investments retreating from government debt.“When the bond market wants to run, it’s going to run much faster than any central banker, and that again is on full display,” said Peter Boockvar, chief investment officer for Bleakley Advisory Group. “Also, be careful what you wish for. Don’t spend all your waking hours trying to artificially suppress interest rates and then root for higher inflation because when the market thinks that inflation will come, it will run you over.”(Updates sixth paragraph to show bonds stalled in Asia.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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  • Hong Kong’s Richest Property Tycoon Plans U.S. SPAC

    (Bloomberg) -- Li Ka-shing, Hong Kong’s richest property tycoon, is planning to raise funds for dealmaking by listing a special purpose acquisition company in the U.S., people with knowledge of the matter said.A company backed by Li’s family is working with advisers on the potential SPAC initial public offering, according to the people, who asked not to be identified because the information is private. They are considering seeking around $400 million, though the exact terms haven’t been finalized, the people said.The blank-check company could file registration documents with the U.S. Securities and Exchange Commission as soon as this week, the people said.Li is lionized by the public in Hong Kong, where he’s been nicknamed “Superman” for his investing prowess. The 92-year-old businessman became famous for his well-timed bets on everything from real estate to social media as he built a corporate empire spanning 50 countries.His family controls CK Hutchison Holdings Ltd., a $29 billion conglomerate that owns one of the world’s biggest port operators and has telecommunications, retail and infrastructure operations across Asia and Europe. They also run CK Asset Holdings Ltd., which is one of Hong Kong’s largest developers and also has investments in hotels, utilities and aircraft leasing. Both companies are now led by Li’s elder son, Victor.Li’s younger son, Richard, has already raised about $900 million via two U.S.-listed SPACs with tech mogul Peter Thiel. Richard is considering setting up a third blank-check company, Bloomberg News reported last week.No final decisions have been made, and details of the transaction could change, the people said. Representatives for Li didn’t immediately respond to emailed queries.(Adds details about Richard Li’s SPAC plans in sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.