Speaker 1: Hello, and welcome to another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway and I'm Joe wasent Thal. Joe, We're
Speaker 1: about to do something we've never done before.
Speaker 2: I'm very excited about this. This is something that I've
Speaker 2: always sort of like wanted to do, maybe even before
Speaker 2: we had a podcast, Like even since I was like
Speaker 2: a little kid watching TV and no like seeing like
Speaker 2: some like news show. Because we're going to talk to
Speaker 2: like someone disguised, right.
Speaker 1: And yes, we are going to talk to an anonymous source,
Speaker 1: an anonymous person, someone who's anonymous online but will also
Speaker 1: be doubly anonymous on this podcast, and we're going to
Speaker 1: be disguising their voice.
Speaker 3: Yeah, I'm really excited.
Speaker 2: I've always wanted to do that because you know, like
Speaker 2: those old like I don't know, like investigative.
Speaker 1: Shows where they have the shadow shadow you see the silhouette.
Speaker 2: Yeah, they sound like a robot and stuff like that,
Speaker 2: and it's like, oh, that's so cool, and you know,
Speaker 2: it's like there's no reason we can't do that.
Speaker 1: Okay, Yes, that is exactly what we're going to do.
Speaker 1: I'll just go ahead and say it. We're going to
Speaker 1: be speaking with high yield Harry, who runs a couple
Speaker 1: of different accounts on social media. He's on Twitter and
Speaker 1: also on Instagram. He also has his own newsletter where
Speaker 1: he's basically chronicling some of the craziness that happens on
Speaker 1: Wall Street in various ways. But also in the credit
Speaker 1: markets specifically, and listeners know that private credit and it's
Speaker 1: sort of differences to traditional public credit markets, So publicly
Speaker 1: issued junk bonds or leverage loans has been a topic
Speaker 1: of interest for us, but in general, credit markets are
Speaker 1: always interesting things, and we have been at a sort
Speaker 1: of interesting juncture in them where last year turned out
Speaker 1: to be a fantastic year for credit if you got
Speaker 1: in at the right time. And that is despite lots
Speaker 1: of people expecting that this would be the area where
Speaker 1: you would see the impact of higher interest rates.
Speaker 3: This was the.
Speaker 1: Frothiest area of the market in some respects, certainly leverage loans,
Speaker 1: and that would be the place where you would see
Speaker 1: trouble from the rate hikes, and yet early twenty twenty
Speaker 1: four haven't really seen that.
Speaker 2: So we talk, obviously, as you said, a lot about credit.
Speaker 2: We talk about a lot in the macro sense, where
Speaker 2: is the investor demand coming from what is the effect
Speaker 2: or not effect of higher interest rates? What is the
Speaker 2: effect of Dodd Frank and shifting lending capacity from banks
Speaker 2: to other non bank institutions, et cetera. And all that's
Speaker 2: great and all that's important, but you can't really like
Speaker 2: understand it just from the sort of like numbers without
Speaker 2: understanding like someone who would just like talk.
Speaker 3: About like the world of like actually like making the
Speaker 3: loans and making the.
Speaker 1: Deals right, the incentives that go into doing this, and
Speaker 1: like who are the players play in this market? Yes, So,
Speaker 1: without further ado, I am very pleased to say we
Speaker 1: have Highyeal Tarry with us. As mentioned, this is his
Speaker 1: real voice. I think it will be obvious when the
Speaker 1: episode comes out. But Harry, thank you so much for
Speaker 1: doing this.
Speaker 4: Yeah, Hi Tracy, Hi Joe. Thanks for having me. You know,
Speaker 4: glad to be the exception, and I'm interested in hearing
Speaker 4: how my voice is going to sound. You might might
Speaker 4: be sounding like the Riddler, you know, holding Gotham for ransom,
Speaker 4: but you know, it'll be interesting to hear how it
Speaker 4: works out.
Speaker 1: So first question, I want to give you the space to,
Speaker 1: you know, explain who you are without giving too much
Speaker 1: away and doxing yourself. But who are you and what
Speaker 1: do you do?
Speaker 4: Yeah, so I'm a junior professional within the world of
Speaker 4: public credit. Uh. You know, I did the typical stint
Speaker 4: from the cell side to credit, and I've experienced wearing
Speaker 4: wearing different hats in terms of public credit and private credit.
Speaker 4: Right now, my focus is on public credit. You know,
Speaker 4: I like the opportunity set there and I'm more of
Speaker 4: a market based individual as opposed to a deal team guy,
Speaker 4: so that that kind of me to public credit. But
Speaker 4: you know, I've dipped my toes in both and have
Speaker 4: done plenty of investment committee memos for both types of offerings.
Speaker 2: I'm really excited about this. I want to get into,
Speaker 2: you know, the world of credit and what you've seen
Speaker 2: from the inside and all of that. But now before
Speaker 2: we do, talk about like your public persona, the high
Speaker 2: Yield Harry persona on Twitter and Instagram, what prompted you
Speaker 2: to adopt this persona and what you know, what come from?
Speaker 3: And why are you one of the only good ones?
Speaker 4: You're two? Time I was I was sitting around in
Speaker 4: mid twenty twenty, COVID was going on, was in my parents'
Speaker 4: basement and you know there was a lot going on
Speaker 4: the credit markets back in like March and April, but
Speaker 4: after that it really settled down and had a lot
Speaker 4: of time on my hands after some you know, more
Speaker 4: stressful like two AM nights, and I decided I really
Speaker 4: wanted to make a finance meme account. Finance memes in
Speaker 4: particular on Instagram really originated back in like twenty seventeen,
Speaker 4: and you know, I would say that was really the
Speaker 4: golden age of finance memes. And I was really as
Speaker 4: a younger guy, enjoying all the memes coming out from
Speaker 4: all those accounts, and I noticed some of those guys
Speaker 4: are starting to post a lot less, so I figured,
Speaker 4: you know, I should try my hand at this. So
Speaker 4: I figured, you know, my my favorite show is Succession.
Speaker 4: You know, I love that show, and I figured, you know,
Speaker 4: I should, I should probably do some memes and incorporate
Speaker 4: Succession into it. And look, that got a lot of
Speaker 4: popularity early on. And you know, as as things developed
Speaker 4: in the credit markets, especially with all the M and
Speaker 4: A activity and craziness going on in like twenty twenty
Speaker 4: one and early twenty two, you know, I think people
Speaker 4: took interest in the into in the account.
Speaker 1: These are popular meme formats, but you're kind of using
Speaker 1: them to say very specific things about the credit markets
Speaker 1: at times. So what is it about the meme format
Speaker 1: that lends itself to sort of credit analysis or credit commentary.
Speaker 4: Yeah, that's a good question. I mean, it's funny how
Speaker 4: niche you can really get, like, you know, you can
Speaker 4: you can get very complex and talk about like liquidation
Speaker 4: preferences or you know, pick for like payment in kind
Speaker 4: and all these all these different nuances from the form
Speaker 4: of a of a viral meme. You know, I'm not
Speaker 4: really sure what drives that psychology, you know, I just
Speaker 4: I just know people people love it and react to
Speaker 4: it in a very unique and niche way. And you know,
Speaker 4: it's it's just really hard to like after that in
Speaker 4: a bottle, I suppose. But you know, as long as
Speaker 4: people are enjoying it and enjoying all these goofy memes
Speaker 4: and videos, and you know, I'm happy to oblige and
Speaker 4: keep the party going.
Speaker 2: You know, I've heard people say things like, you know,
Speaker 2: when you're becoming fluent in a foreign language, when you
Speaker 2: have a dream in that language, And I think there's
Speaker 2: an equivalent where it's like, you know, you actually understand
Speaker 2: an industry well when you get the jokes and the
Speaker 2: memes and the more uniche the better. And you know,
Speaker 2: it's like, because there are meme pages for like literally
Speaker 2: every industry. There's like, you know, trucking memes and then
Speaker 2: truck driver meme pages, and then freight memes and freight
Speaker 2: meme pages. It goes at broker broker meme pages, et cetera.
Speaker 2: And it's like I get someone, you know, I look
Speaker 2: at them because we've done a lot of freight, and
Speaker 2: I like get.
Speaker 3: Half the jokes.
Speaker 2: It's like, Okay, I still have more work to do.
Speaker 1: That's right. When you use the distracted boyfriend meme, it's
Speaker 1: like a proficiency certificate.
Speaker 3: Yeah, it really is.
Speaker 2: It's like, can you make a meme for an industry
Speaker 2: that the industry participants themselves find funny? And most people
Speaker 2: can't do it because they don't know enough. But like
Speaker 2: that is I do think like sort of like the
Speaker 2: test of industry domain expertise. Can you mean, can you
Speaker 2: get the memes and can you make the memes that
Speaker 2: the other people find funny?
Speaker 4: Yeah? Yeah, absolutely, Joe. And you know, I think as
Speaker 4: time has gone along, it's it's taken me a very
Speaker 4: short amount of time to make some of these memes.
Speaker 4: And you know, I wish I had a more useful skill,
Speaker 4: like a skill to economic value. But you know, I
Speaker 4: watch a lot of TV. I'll watch a lot of
Speaker 4: good TV shows and I kind of have like etched
Speaker 4: in my brain, use some of the great quotes or
Speaker 4: some of the great scenes from them, and you know,
Speaker 4: all of a sudden you might get a like no
Speaker 4: Country for Old Men or a Tomorrow meme, you know,
Speaker 4: associated with finance, and you know that's the type of
Speaker 4: stuff that like people people love out of nowhere, and
Speaker 4: you tie that to something niche and you know it'll
Speaker 4: pop off.
Speaker 1: I definitely have more questions on the social media side
Speaker 1: of things. But why don't we talk credit for a bit?
Speaker 1: You know, I'm sure you've been listening to some of
Speaker 1: the episodes that we've done where we're digging into private credit.
Speaker 1: But how would you characterize the difference between working in
Speaker 1: private credit versus working on the public side?
Speaker 3: Question?
Speaker 4: Yeah, so you know there's pros and cons in each.
Speaker 4: You know, I think with private credit, I was, I
Speaker 4: think there's higher compensation for the individuals in there, So
Speaker 4: you know, that's best one thing. But uh, you know,
Speaker 4: I think I think with private credit, you you can
Speaker 4: structure things in a lot of different ways, and you know,
Speaker 4: the the opportunity set is very large.
Speaker 1: Uh.
Speaker 4: You know, you can look at something from a lower
Speaker 4: middle market lens, middle market lens, or you can even
Speaker 4: eat and share in the broadly sy indicated loan market.
Speaker 4: You know, I think with private credit, one one thing
Speaker 4: in particular is you get you can get a lot
Speaker 4: more in the weeds. You know, you can get a
Speaker 4: lot more comprehensive data room, and you know, really get
Speaker 4: in front of the management teams, really make sure uh
Speaker 4: they're answering the questions you need. And you know, I
Speaker 4: think I think the relationship with sponsors is a lot
Speaker 4: more important in the private credit world, where you know,
Speaker 4: in private credit, a lot of our deal flow came
Speaker 4: from sponsor relationships. You know, may may come from a banker,
Speaker 4: but it also may come from a sponsor in terms
Speaker 4: of you know, we want you as the lender that
Speaker 4: we're going to work with, or you know, uh, here's
Speaker 4: ten lenders we're gonna we're gonna pick one or maybe
Speaker 4: we'll pick four, and you guys need to get a
Speaker 4: term sheet in our hands as soon as possible. Uh.
Speaker 4: You know, I think one of the cons with private
Speaker 4: credit though, is I think from a fun standpoint, you're
Speaker 4: a little more concentrated on your bets, and then there's
Speaker 4: illiquidity as well, so you know, when you really make
Speaker 4: an investment, you know, I think you need a lot
Speaker 4: higher conviction given that is, you know, it's not necessarily
Speaker 4: something you can trade out of. So flipping over to
Speaker 4: public credit from a liquidity standpoint, you know, you may
Speaker 4: have one hundred lenders within a broadly syndicated loan, and
Speaker 4: you know, if it's a billion dollar loan, you can
Speaker 4: get decent liquidity there, you know, even if it's like
Speaker 4: a B minus credit. So you know, I think I
Speaker 4: think having that liquidity is a big positive for public
Speaker 4: credit because with private credit, I think it's a lot
Speaker 4: harder to change things or have a loan change hands
Speaker 4: as things go south. But you know, the con with
Speaker 4: public credit, in contrast to what I explained with diligence
Speaker 4: in the data room and you know, getting in front
Speaker 4: of management and what have you, is you know, you
Speaker 4: get on a lot of these lender calls is a
Speaker 4: public credit guy and management will frankly, just toss your
Speaker 4: question to decide or say oh, you know, well we'll
Speaker 4: follow up with you offline about that, or you know,
Speaker 4: say oh, we're not going to disclose that for competitive reasons.
Speaker 4: And you know, some of these questions are things you
Speaker 4: need to know. Is A is a underwriting investor and
Speaker 4: it's unfortunate it doesn't get answered, but that's kind of
Speaker 4: how it's structured. And you know you'll get a data
Speaker 4: room and public credit to that's a lot more thin
Speaker 4: relative to the private credit. And then the last component
Speaker 4: too is you know documentation where you know, I think
Speaker 4: public credit we've seen this massive wave of pub light loans,
Speaker 4: you know, no maintenance covenants and you know, looser docks
Speaker 4: in terms of what a sponsor can and cannot do.
Speaker 4: I think of private credit you can get some stronger
Speaker 4: protection and you know, more more of a heads up
Speaker 4: as things go south. You know, I think, is the
Speaker 4: private credit loans get bigger, there's you know, there's looser documentation,
Speaker 4: but you know for a general middle market or or
Speaker 4: lower loan, you know, I think you're getting stronger, uh documentation.
Speaker 2: M Can I ask a definitional question, is a data
Speaker 2: room a literally a room where you walk into a
Speaker 2: sealed room and look at information and can't take it out.
Speaker 3: Or is it is that? Is it virtual? Like what
Speaker 3: is a data room?
Speaker 4: Yeah, well it's funny, you know, a data room gets
Speaker 4: gets a lot of jokes like that where people meme
Speaker 4: about it being a physical place, but it's actually more
Speaker 4: of a virtual place. You know. It could be on
Speaker 4: a website like syndtrack, or it could be on something
Speaker 4: as simplistic as dropbox, where a lot of data is
Speaker 4: inputed into an online database. So that can be financials,
Speaker 4: can be a confidential information memorandum sim you know, lender presentation,
Speaker 4: legal documents, KPIs, and just a lot of various information
Speaker 4: that helps an investor assess an investment opportunity.
Speaker 3: Can I ask your take?
Speaker 2: This is a question that comes up in every credit conversation,
Speaker 2: and I'm not always satisfied with the answers, But what
Speaker 2: is the attraction for investors to go into private credit?
Speaker 2: Because people say it's correlated, but it's like, yeah, of
Speaker 2: course it's it's like and it's like other returns are higher.
Speaker 2: But you know, as you say, it's a liquid no
Speaker 2: mark to market, how would you characterize the appetite from
Speaker 2: investors to lend via the private credit channel.
Speaker 4: Yeah, you know, I think as like sofur and base
Speaker 4: rates have has increased, you're getting a very attractive return.
Speaker 4: And then you know, I think also from the covenant
Speaker 4: standpoint as well, you know that that provides a little
Speaker 4: more structure relative to leverage learns or how you'll bonds potentially.
Speaker 4: And look, I think private equity has shifted a lot
Speaker 4: of deal flow to private credit. So naturally, if you're
Speaker 4: if you're looking to invest in credit, you know you're
Speaker 4: looking to include some private credit into that mix as well.
Speaker 4: You know, I'm still I'm still bullish on private credit.
Speaker 4: You know, I think there's a lot of smart and
Speaker 4: sophisticated investors in the space. But you know, I think
Speaker 4: I think there I think there's also a lot of
Speaker 4: deals that get done on a relationship basis. But ultimately,
Speaker 4: you know, you get pretty pretty decent double digit returns
Speaker 4: and you know you have a first lean position as
Speaker 4: opposed to an equity position, So you know, on an
Speaker 4: LTV basis, I think you're fine with with a lot
Speaker 4: of these names, talk.
Speaker 1: To us more about how a private credit deal actually
Speaker 1: comes into being versus say, a syndicated loan or something
Speaker 1: like that, because I think like the actual process by
Speaker 1: which an issuer chooses to go the public or the
Speaker 1: private route is still something I'm kind of like wrapping
Speaker 1: my head around, like what is the I guess the
Speaker 1: catalyst for going one way or another? Who's like calling
Speaker 1: the shots or who is influential in this process?
Speaker 4: Yeah, so, you know, I think a big thing I
Speaker 4: saw on private credit was people or sponsors would favor
Speaker 4: private credit in situations where banks for someone else is
Speaker 4: moving too slow and you know, they, like private equity,
Speaker 4: would want to partner that moves fast and moves quickly
Speaker 4: with them. So, you know, I think I think that's
Speaker 4: an instance where private credit can come in and you know,
Speaker 4: help provide a level of execution and certainty, which you know,
Speaker 4: I think I think is massive, you know, I I do.
Speaker 4: I do think the public credit market makes a lot
Speaker 4: of sense for a lot of these bigger issuers. But
Speaker 4: but in terms of like you know, on the smaller side,
Speaker 4: I think I think private credit comparably make makes a
Speaker 4: lot of sense. So in terms of how these how
Speaker 4: these deals end up getting done, you know, like I
Speaker 4: mentioned earlier, a lot of this is from relationships. You know,
Speaker 4: might be a banker who gives it out, but it's
Speaker 4: predominantly going to be a sponsor who's who's seeking out
Speaker 4: term sheets from from lenders. Uh. You know, in terms
Speaker 4: of assessing this, it's it's all about you know, myself
Speaker 4: as a junior person and then you know, other other
Speaker 4: people on the totem pole from like VP to director
Speaker 4: m d uh, you know, assessing the data room hot,
Speaker 4: you know, getting in front of the sponsor, make sure
Speaker 4: we're getting what we need answer before we can take
Speaker 4: this to an investment committee, you know, confirming internally whether
Speaker 4: senior individuals and the firm have have interest in continuing
Speaker 4: with the process. Uh. And and you know a lot
Speaker 4: of these a lot of these deals end up end
Speaker 4: up following a timeline where it's like, oh, you know,
Speaker 4: we already have turn sheets or indicated interests from a
Speaker 4: lot of other lenders. We need you to move fast.
Speaker 4: And part of it too is like a sponsor testing
Speaker 4: you of like you know, you you need to move
Speaker 4: fast because we want to work with the partner who
Speaker 4: will move fast with us. So you know, we we
Speaker 4: work pretty hard modeling and deal out, you know, building
Speaker 4: out like an internal memorandum which you know is our
Speaker 4: is our story for the investment, you know, detailing the transaction,
Speaker 4: the sponsor, the company, you know, getting nuts and bolts
Speaker 4: on on how on how the company works. You know,
Speaker 4: any any key risks in mitigans from like a vendor, contract, cost, structure,
Speaker 4: industry standpoint. Uh. And then you know, thinking internally how
Speaker 4: how we want to go about uh the pricing we
Speaker 4: offer and you know, and any other components and in
Speaker 4: look too, I also you know, spend some time uh
Speaker 4: you know, doing a little bit of equity as well,
Speaker 4: and you know, whether we can provide a a lending
Speaker 4: solution that's first lean in conjunction with some other lenders,
Speaker 4: or whether we want to provide something from a one
Speaker 4: stop shop situation where you're also contributing equity to help
Speaker 4: you know, really carry the deal. Is a key component
Speaker 4: when when modeling it out, when when doing research and
Speaker 4: kind of measuring returns and look from there, you go
Speaker 4: to your investment committee. You you you figure out what
Speaker 4: what needs to be addressed, whether the risks have been mitigated,
Speaker 4: and if it has been you're able to go and
Speaker 4: get an indicative term sheet out to out to a
Speaker 4: sponsor if they select you or you and another group
Speaker 4: of lenders. You know, you might find yourself in the Midwest,
Speaker 4: look like on the on the floor of like a
Speaker 4: of a widget manufacturing company and you know, working hand
Speaker 4: in hand with legal the sponsor to to you know,
Speaker 4: really assess the deal and make sure it it closes,
Speaker 4: and you know you feel very comfortable and have a
Speaker 4: strong conviction in your deal.
Speaker 1: Were you ever involved in a deal where you had
Speaker 1: to take back the keys, as they say, and like
Speaker 1: you know, you end up running the widget manufacturer accidentally?
Speaker 4: No, I haven't, And I think I think that's a
Speaker 4: function of the current credit environment where things are still okay,
Speaker 4: you know, if we've had a massive rise in interest rates,
Speaker 4: I think it takes a while for that to like
Speaker 4: filter out. I think those taking the key situations are
Speaker 4: going to be an interesting storyline over the next few years,
Speaker 4: you know, I think maybe to get ahead of myself,
Speaker 4: you know, I think pick and payment in kind is
Speaker 4: a way right now for a lot of sponsors and
Speaker 4: lenders to address some of these you know, twenty twenty
Speaker 4: one or deals like that that that were a little
Speaker 4: weaker and you know, give it a little bit of
Speaker 4: of a longer timeline to run. So you know, I
Speaker 4: think the moment we're we're we're going to see less
Speaker 4: key taking situations. You know, I feel I feel a
Speaker 4: little comfortable with twenty four. It's just going to be interesting,
Speaker 4: you know, in twenty twenty five and onwards, how many
Speaker 4: key taking situations we get?
Speaker 1: Yeah? What do you think also about some of the
Speaker 1: big investment banks now getting into private credit, because this
Speaker 1: seems to be the irony, right, It's like private credit
Speaker 1: kind of became a thing because banks were retrenching from
Speaker 1: lending or it was harder for them to lend. But
Speaker 1: now they're getting into it, and also like they're sort
Speaker 1: of competing with I guess their own syndicated bond and
Speaker 1: loan businesses. It just seems kind of funny.
Speaker 4: Yeah, it's a little bizarre because it's pretty much balance
Speaker 4: sheet lending. So you know, it's it's a little interesting.
Speaker 4: You know. I I have a harder time imagining, you know,
Speaker 4: banks wanting to hold on to a lot of debt.
Speaker 4: You know, I think I think the syndication market it
Speaker 4: works works really well from like a risk management standpoint,
Speaker 4: but it'll be you know, it'll be interesting to see
Speaker 4: how how it develops. And you know, I don't even
Speaker 4: know if I want to call it private credit if
Speaker 4: it's a bank doing right, it's just kind of like
Speaker 4: it's kind of like bank lending.
Speaker 2: Is the idea that they're going to create pools of
Speaker 2: capital to lend that aren't there, like balance sheet capital,
Speaker 2: that they're going to get out like essentially create some
Speaker 2: vehicle for outside lend or outside LPs or investors, and
Speaker 2: then the bank essentially becomes the conduit for it.
Speaker 4: Yeah. Yeah, I mean there are there are some like
Speaker 4: balance sheet lenders, but you know, there are also a
Speaker 4: lot of banks looking at JV partners as well. You know,
Speaker 4: it'll be interesting to see how it develops. I think,
Speaker 4: like one argument for it is like maybe you can
Speaker 4: graduate people from like middle middle market lending to you know,
Speaker 4: larger lending, you know, as as a company grows over time,
Speaker 4: and you know, maybe that's a good way to have
Speaker 4: relationship management, if you know. I cause I think, like history,
Speaker 4: you've seen a lot of like middle market names graduate
Speaker 4: over time to like the broadly syndicated loan market.
Speaker 2: You mentioned that for professionals in this space, private credit
Speaker 2: is currently more lucrative than public credit is that basically
Speaker 2: a function of the necessity of things like relationships or
Speaker 2: the skill level to craft the right you know, covenant
Speaker 2: structure for the deal. Thats just say, more importance of relationships,
Speaker 2: more importance of being able to create a bespoke covenant
Speaker 2: structure that allows the people in the space to make
Speaker 2: more money.
Speaker 4: Yeah, you know, I feel like I've seen a lot
Speaker 4: of investment banking analysts and associates head over to private
Speaker 4: credit as opposed to them heading over to public credit. So,
Speaker 4: you know, I think that's the function of it where
Speaker 4: you know, that skill set they had an ib makes
Speaker 4: more stents than private credit because you know, it is
Speaker 4: like very similar to what they were doing before in banking.
Speaker 4: So you know, I think that's a key driver. I
Speaker 4: think fun growth is a key driver. You know. I
Speaker 4: think the returns I think a m growth are are
Speaker 4: key drivers in the moment. And look, I think with
Speaker 4: public credit to you know, compensation varies widely depending on
Speaker 4: where you are, and you know, some some public credit
Speaker 4: can be a lot more sleep and night credit as
Speaker 4: opposed to private credit, which I think, you know needs
Speaker 4: significant diligence and given the like ill liquidity, you know,
Speaker 4: you're really you're really digging in there and spending a
Speaker 4: lot of hours on it. Well, I think I think,
Speaker 4: I think a lot of public credit. You know, if
Speaker 4: if it's more hedge fund oriented or long short oriented,
Speaker 4: and I think that that compensates higher. But if there's
Speaker 4: a little more sleepy of a fun then you know,
Speaker 4: I think they'll comp lower.
Speaker 1: You actually do a compensation survey on your newsletter, I think.
Speaker 1: And I find this a really interesting aspect of some
Speaker 1: of the anonymous finance accounts now that they are you know,
Speaker 1: either collecting or being given and information from people in
Speaker 1: the industry, primarily I think, like younger people in the industry.
Speaker 1: And this seems to be a big change on Wall Street. Like,
Speaker 1: you know, there used to be if you worked at Goldman,
Speaker 1: maybe you talk to other Goldman people a little bit
Speaker 1: about comp but everything was like kind of secret, like
Speaker 1: there wasn't a lot of transparency on Wall Street. But
Speaker 1: it feels like that's changing, even though it's just to
Speaker 1: be clear, it's not the banks themselves that are driving
Speaker 1: this transparency. It's like the actual workers and primarily the
Speaker 1: junior ones.
Speaker 4: Yeah, yeah, absolutely, you know, I think that's one of
Speaker 4: the better parts of running this platform is just the
Speaker 4: compensation transparency that's been able to come out of this,
Speaker 4: especially in credit because you know, I think with investment
Speaker 4: banking you can kind of figure out structure of where
Speaker 4: analysts and associates get paid out. But you know, once
Speaker 4: you get once you start getting like credit associate and
Speaker 4: credit VP compensation level by city, you know, you can
Speaker 4: provide a lot of transparency. And I've had a lot
Speaker 4: of people come to me and say, you know, they've
Speaker 4: used it in terms of making sure they're getting compensated
Speaker 4: appropriately when when getting a new job or or something
Speaker 4: along that line. So you know, I think there there's
Speaker 4: also some private equity compensation in there too within the survey.
Speaker 4: And you know, I run this like every March, and
Speaker 4: you know, I think you'll learn a lot from it.
Speaker 4: So I'm excited to see what I find out in
Speaker 4: the next month, month and a half or so. But
Speaker 4: you know, I think you can you can really learn
Speaker 4: a lot from it. And I think I think over
Speaker 4: time is you know, more followers increasingly become more senior
Speaker 4: is going to be really interesting sort of provide more
Speaker 4: transparency beyond just the junior level and really dig into
Speaker 4: like Okay, you know, I'm a mid level professional. What
Speaker 4: should I be making? You know, what type of carry
Speaker 4: interest should I be having? Even And you know, I
Speaker 4: think that type of granularity is going to be good
Speaker 4: because I think, especially like the mid level, you know,
Speaker 4: there's there's not much transparency.
Speaker 3: Are you well with coming on and Tracy?
Speaker 2: Should we do a lots more in March with the
Speaker 2: results of the survey?
Speaker 1: Yeah?
Speaker 3: Yeah, come back.
Speaker 2: Can we have you back on in March and do
Speaker 2: a little mini episode with reveal the survey results?
Speaker 4: Yeah? Yeah, let's see what happens. Yeah, it comes out,
Speaker 4: It comes out by my news letter.
Speaker 2: But yeah, no, you mentioned that you started the account
Speaker 2: in twenty twenty. You know a lot of people at
Speaker 2: home doing things on the internet. One of the things
Speaker 2: that I've come to appreciate about that era or twenty
Speaker 2: twenty in particularly twenty twenty one, very evident in say
Speaker 2: like tech investing, that like there was just this explosion
Speaker 2: of deal flow, like particularly private tech investing. So like
Speaker 2: people you maybe someone had a sub stack, maybe they
Speaker 2: had ten thousand followers on Twitter, and suddenly they could
Speaker 2: like plug and play into angel list and they started
Speaker 2: like signing over Zoom and docu sign angel deals and
Speaker 2: then I sort of live later on like realized it
Speaker 2: was it just tech that like in real estate transaction,
Speaker 2: it's a very similar phenomenon that a lot of people
Speaker 2: got in. You know, these sort of crazy years and
Speaker 2: syndications of like hey, let's sort of you know, buy
Speaker 2: up apartment buildings and the sun belt and stuff, and
Speaker 2: so you had all these like newcomers. Can you talk
Speaker 2: a little bit about like what twenty twenty and twenty
Speaker 2: twenty one was like from the private from the credit
Speaker 2: perspective or the private credit perspective, those sort of like
Speaker 2: those sort of like crazy high speed like go go years.
Speaker 4: I think during that timeframe I can speak a little
Speaker 4: more to like public credit sure as opposed as opposed
Speaker 4: to private credit. But you know, I think there was
Speaker 4: there was a lot of deal flow in twenty one,
Speaker 4: and you know, a lot of LBOs came to the market,
Speaker 4: you know, I think, I think a little bit later
Speaker 4: in twenty twenty as well. Yeah, and you know, you
Speaker 4: you had this massive rush of deals. You had investment
Speaker 4: bankers getting really worked to the work to the brim,
Speaker 4: and you know that provided like a lot of a
Speaker 4: lot of compensation increases where you know a lot of
Speaker 4: people across the industry at a junior level where all
Speaker 4: of a sudden getting like a twenty five k bump,
Speaker 4: fifty fifty k bump, you know, great bonuses, and you know,
Speaker 4: I think that was that was great in terms of
Speaker 4: enhancing junior compensation, but you know also in terms of
Speaker 4: deal flow. You know, you had a lot of deals
Speaker 4: get done at at low rates in high multiples, and
Speaker 4: you know, we're competitive processes and you need to look
Speaker 4: at some of these deals and be like, you know,
Speaker 4: DoD GEZ, like do we do we really want to
Speaker 4: underwrite this? You know this kind isn't good and look,
Speaker 4: I think the biggest thing from this, and you know,
Speaker 4: the more challenging part of being a credit investor is
Speaker 4: you looked at a lot of these twenty twenty twenty
Speaker 4: twenty one financials and yeah, this company have a gangbuster year,
Speaker 4: you know, and do an amazing job, and then they
Speaker 4: come to the market to refinance or take a dividend
Speaker 4: or something like that, and then look, all all of
Speaker 4: a sudden, you have all these people do these deals
Speaker 4: and then you realize it was a COVID bump, Like
Speaker 4: you know, you realize everyone was stuck at home, and
Speaker 4: there's you know, there's all these companies that had one
Speaker 4: time big, big events and then now financials are down
Speaker 4: like significantly relative to heights. And look, that makes up
Speaker 4: a lot of the distressed market you see in public
Speaker 4: credit at the moment. And I think this is probably
Speaker 4: a similar story on the private credit issue side as well.
Speaker 4: And you know, I definitely screened a lot of deals
Speaker 4: that had like a gangbuster twenty twenty or twenty twenty
Speaker 4: one and then you know, really fell off, and you know,
Speaker 4: you don't want to catch a falling knife there. I
Speaker 4: guess it's easy to say this in hindsight, but not
Speaker 4: a lot of people actually did. It was you know,
Speaker 4: to kind of spot the trends of like, oh, you know,
Speaker 4: this isn't really sustainable, and you know, go and invest
Speaker 4: in this type of deal, because you know, if you did,
Speaker 4: now you're looking at a distressed or more challenging situation
Speaker 4: and something that looks a lot worse relative you're underwright.
Speaker 4: And I think there's a lot of like market participants
Speaker 4: who are now dealing with this hangover relative to twenty
Speaker 4: twenty one, and you know, our stuff with a lot
Speaker 4: of distress names and you know, worse situations or you know,
Speaker 4: took a hit when they when they didn't really need.
Speaker 1: To speaking of things not being sustainable. Does it feel
Speaker 1: like the balance of power is starting to shift? I
Speaker 1: guess away from the junior analyst because this was also
Speaker 1: a hallmark of the twenty twenty twenty twenty one boom times. Right,
Speaker 1: everyone was working super hard, there was so much deal flow,
Speaker 1: and that kind of gave a lot of employees the
Speaker 1: fire power to start pushing back against some of their
Speaker 1: working conditions. So, for instance, we saw the I guess
Speaker 1: infamous at this point Goldman presentation where I can't remember
Speaker 1: if it was interns or the analysts, but they basically
Speaker 1: presented or they disseminated a presentation to Goldman senior management,
Speaker 1: serving their working conditions, their work hours, and making the
Speaker 1: point that things were getting worse and they were even
Speaker 1: having to work on Saturdays, which historically was something that
Speaker 1: was preserved on Wall Street. Is that starting to shift
Speaker 1: now as interest rates go higher and maybe deal flow
Speaker 1: has ebbed a little bit in twenty well not a
Speaker 1: little bit significantly in twenty twenty three.
Speaker 4: Yeah, you know, I think that dynamics started changing even
Speaker 4: in like twenty twenty two. And you know, shout out
Speaker 4: to Liquidity on the yeah on the thoo for getting
Speaker 4: that GS presentation out there. I think he got it
Speaker 4: DM to him and he just posted it, and you know,
Speaker 4: that really helped spark the movement of people getting paid more.
Speaker 4: I think this dynamic started change when when deal flow
Speaker 4: went down in twenty two, and you know, I think
Speaker 4: that's when you first started seeing cuts amongst the junior level.
Speaker 4: You know, there's been some private equity and private credit
Speaker 4: junior cuts in twenty three. But I think I think
Speaker 4: a lot of the people that ended up worse off
Speaker 4: for people who kind of stuck around and investment banking
Speaker 4: a little too long. You know a lot of people
Speaker 4: who didn't get that like associate offer after their two
Speaker 4: years and in banking, or you know, I like, I
Speaker 4: know people that got zeroed on their on their comp
Speaker 4: from a bonus standpoint, or you know, they got bonus
Speaker 4: and like you know, they worked like ninety hours and
Speaker 4: got like a twenty k thirty k bonus, which you
Speaker 4: know is a lot less than what you can find
Speaker 4: in public credit private credits. So you know, I think
Speaker 4: I think people forgot that, like twenty one was an
Speaker 4: extraordinary year, and you know, not how you want to
Speaker 4: measure future compensation. So yeah, look there's cycrutality, and you know,
Speaker 4: I think if we don't get deal flow ramping back
Speaker 4: up in twenty four, then I think things get increasingly challenged.
Speaker 4: And look, I think most people are back in the
Speaker 4: office at least three days a week, if not four.
Speaker 4: You know, I'm not I'm not a fan of five
Speaker 4: days in but you know, I think I think I
Speaker 4: think the tide certainly has turned, and you know, but look,
Speaker 4: the reality is, it's it's so much better than it
Speaker 4: was in like twenty nineteen. You know, it's so hats
Speaker 4: off from that perspective.
Speaker 2: Wait, just real quickly, I guess you're not a fan
Speaker 2: of five days in the office.
Speaker 3: Just I'm just curious.
Speaker 2: Do you notice any difference of working in the office
Speaker 2: first not and on productivity, on how the team operates whatever.
Speaker 4: Yeah, you know, you know, I think I think it depends. Look,
Speaker 4: I think if you if you're in a deal team structure,
Speaker 4: like if you're in private credit, I think it's I
Speaker 4: think it makes a lot more sense to be in
Speaker 4: the office. But if you're styled off like if you're
Speaker 4: in public credit, if you if you're covering a certain
Speaker 4: industry and most of your communication is with your portfolio managers.
Speaker 4: That and I think I think remote work really kind
Speaker 4: of favors that, you know, I think I think to
Speaker 4: be fair too, a lot of people live in like
Speaker 4: small Manhattan apartments, so you know, being in the office,
Speaker 4: especially when you know it might be anywhere from like
Speaker 4: ten minutes to thirty minutes away, it is that big
Speaker 4: a deal. But you know, I am kind of bullish
Speaker 4: remote work over time because I think for me in particular, right,
Speaker 4: like I you know, I do my job, and then
Speaker 4: I also do this high old Harry stuff off to
Speaker 4: the side, and you know that that involves a lot
Speaker 4: of work in my apartment. And you know, I'm certainly
Speaker 4: productive when I when I'm doing that.
Speaker 1: Joe's trying to bait me into another rant against return
Speaker 1: to office. I'm not going to do it, Joe, don't know.
Speaker 2: The only reason I asked is because, like it's such
Speaker 2: a charged topic that the only person I would ever
Speaker 2: trust to get a good answer is someone who's anonymous.
Speaker 1: Wait, but Harry, actually you brought up exactly what I
Speaker 1: wanted to ask you next, what are the logistics of
Speaker 1: actually running an anonymous social media account while working in
Speaker 1: the industry, And do you ever have weird situations where
Speaker 1: like you're sat in the office and someone brings up
Speaker 1: one of your memes.
Speaker 4: Yeah, yeah, yeah, you know, it's it's tough to get
Speaker 4: too too granular on that, but you know, I have
Speaker 4: I have a lot of people who I work with
Speaker 4: or I have worked with, who follow the account, who
Speaker 4: like my stuff all the time, who are subscribed to
Speaker 4: my newsletter. So you know, that's that's always that's always interesting.
Speaker 4: And you know, I think it's I think it's humbling too.
Speaker 4: And like someone I looked up to at like an
Speaker 4: analyst level, who's like a little bit older than me,
Speaker 4: like likes my stuff and you know, says, oh this
Speaker 4: is good or whatever, like you know, that's that's definitely
Speaker 4: humbling for me. But but yeah, you know it is.
Speaker 4: It is a little uh challenging to try to navigate that,
Speaker 4: you know, especially when someone makes a joke who're just
Speaker 4: kind of like wondering out. You know, I think I'm
Speaker 4: pretty sure I made that joke on social media like
Speaker 4: a few days ago.
Speaker 1: Hild Harry that was so much fun. Thank you, yeah,
Speaker 1: thank you for coming on and letting us disguise your
Speaker 1: voice and sound like the Riddler or Robot. I actually
Speaker 1: don't know what it's going to turn out like, but
Speaker 1: I'm really looking forward to listening, so thank you so much.
Speaker 4: Thanks for having me.
Speaker 1: Up, Joe. That was so much fun. I have to ask,
Speaker 1: do you have a Burner account?
Speaker 3: I have an alt? I've said it.
Speaker 2: Oh, yeah, it's where I post really controversial takes, like
Speaker 2: my view on the Jones Act and work from home
Speaker 2: and return to office, things that, you know, really things
Speaker 2: that I would not want to be associated with publicly.
Speaker 1: I've I've often been tempted to start an anonymous alt,
Speaker 1: but I haven't done it. I am on Reddit anonymously,
Speaker 1: but I think that's like, that's pretty normal.
Speaker 3: That was really fun though.
Speaker 2: I really enjoyed that conversation and just sort of like
Speaker 2: hearing about it from the insids, especially the fact that
Speaker 2: he's done both private and and public credit. I thought
Speaker 2: it was really interesting this idea, and that hadn't clicked
Speaker 2: to me before. But it makes a lot of sense
Speaker 2: that private credit is more like ib skills investment banking
Speaker 2: skills and that public credit is probably just like more
Speaker 2: like traditional analyst skills, where you're looking at a balance
Speaker 2: sheet and you're like, Okay, are they going to be
Speaker 2: able to make this payment? And the idea like that
Speaker 2: is the different skill dimensions. They're not something that had
Speaker 2: really clicked to me before.
Speaker 1: Very much relationship building in private credit. But I would
Speaker 1: just push back against that a little bit, which is like,
Speaker 1: if you're syndicating deals in the public market, there is
Speaker 1: an element of that because you have to build the
Speaker 1: consortium and you have to you know, talk to your
Speaker 1: potential investors. But yeah, absolutely it feels more ib like.
Speaker 1: I also thought it was interesting what he was saying
Speaker 1: about some of the pressure on speeds of deals. So
Speaker 1: the idea that like, well, maybe a company is going
Speaker 1: to want to do a private credit deal because it's
Speaker 1: faster than talking to a bank, or the bank is
Speaker 1: taking too long to you know, tick various risk management
Speaker 1: or regulatory boxes or whatever.
Speaker 3: It does feel like.
Speaker 2: In business there is like a real value to being
Speaker 2: able to like produce cash at any time at any
Speaker 2: at a moment's notice, And it feels like, you know,
Speaker 2: it's like the rest of us, you know, plead So
Speaker 2: if we want to like buy a property. You know,
Speaker 2: it's like you go to a bank and you fill
Speaker 2: out hundreds of pages of paperwork and then you hear
Speaker 2: back and then maybe months later it gets approved. Whereas
Speaker 2: if you actually want to do business, if you actually
Speaker 2: want to do deals in a real way, you really
Speaker 2: need to have that relationship where it's like, hey, it's
Speaker 2: me Joe. Hey Tracy, I need a million dollars because
Speaker 2: there's an opportunity to buy this self storage space on Monday,
Speaker 2: and you say, yeah, I know who you are, Joe.
Speaker 2: Here's the million dollars. And if you have that relationship,
Speaker 2: that's incredibly valuable versus the person that sort of has
Speaker 2: to go to the traditional route.
Speaker 1: Hey, Joe, I need a million dollars to buy a
Speaker 1: chain of self storage units.
Speaker 3: No, I'm not lending it to you, Tracy.
Speaker 2: I don't know your track record, and I think and
Speaker 2: I think self storage is overvalued.
Speaker 1: Okay, fair enough. Shall we leave it there.
Speaker 3: Let's leave it there.
Speaker 1: This has been another episode of the Authoughts podcast. You
Speaker 1: can follow me at Tracy Allaway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest High Yield Harry. He's at High Yield Harry.
Speaker 2: Follow our producers Carmen Rodriguez at Carmen Arman, dash Ol
Speaker 2: Bennett at Dashbot and kel Brooks at kel Brooks. And
Speaker 2: thank you to our producer Moses Ondam. For more Odd
Speaker 2: Lots content, go to Bloomberg dot com slash odd Lots
Speaker 2: where with a blog, transcripts and a newsletter, and you
Speaker 2: can chat with fellow listeners twenty four to seven in
Speaker 2: the discord discord dot gg slash odlines.
Speaker 1: And if you enjoy Odd Lots, if you want us
Speaker 1: to have Harry back on to talk about his comp survey,
Speaker 1: then please leave us a positive review on your favorite
Speaker 1: podcast platform. And remember you can listen to Oddlots episodes
Speaker 1: ad free if you're a Bloomberg subscriber. All you have
Speaker 1: to do is connect to your Bloomberg account to Apple Podcasts.
Speaker 1: Thanks for listening,