Kelly Evans Quotes

It is very difficult to predict when a bond crisis could happen.

If investors avoid the Treasury market, we could be unable to pay off maturing securities, which would mean an immediate default. Market participants generally agree that even a brief default would create potentially catastrophic risks to the financial system, like the meltdown of 2008.

The very nature of finance is that it cannot be profitable unless it is significantly leveraged... and as long as there is debt, there can be failure and contagion.

In a crisis, markets always look to see who is the next-worst off and proactively begin shying away from them.

Most of the time, your risk management works. With a systemic event such as the recent shocks following the collapse of Lehman Brothers, obviously the risk-management system of any one bank appears, after the fact, to be incomplete. We ended up where banks couldn't liquidate their risk, and the system tended to freeze up.

One of the most important causes of economic crises is “running liabilities”, or short term debt that the government does not insure. The U. S. financial sector holds trillions of dollars of such debt, including uninsured bank deposits and the short-term liabilities of other financial institutions, such as overnight loans…. Amongst the potential causes of the next crisis, the massive amount of short-term debt ranks as the most probable.

History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

One day we will have more inflation, and our bonds will bleed like a pig. The only reason for buying long bonds is short-term or as a desperate haven for terrorized investors. But the potential to make longer-term real money is naught.

The big question is: When will the term structure of interest rates change? That's the question to be worried about.

The real danger with debt is what happens if lots of people decide, or are forced, to pay it off at the same time.

The moment a large investor doesn't believe a government will pay back its debt when it says it will, a crisis of confidence could develop. Investors have scant patience for the years of good governance - politically fraught fiscal restructuring, austerity and debt rescheduling - it takes to defuse a sovereign-debt crisis.

Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out - even if a country can print its own currency and write its own cheques.

Today, even small entities that trade complex instruments or are granted sufficient leverage can threaten the global financial system.

Rising interest rates are considered bad for stocks because they raise the cost of doing business and depress corporate earnings and because higher yields make bonds relatively more attractive than stocks to investors.

And so it can be very much in the interest of bank A to sell-short bank B shares, or buy CDSes on bank B, because they have exposure to bank B. It's the responsible thing to do as a fiduciary, and yet if everyone does it at the same time, it's destabilizing because everyone is selling.

To finance deficits, the government must sell bonds to investors, competing for capital that could otherwise be used to invest in stocks or corporate bonds. Government borrowings raise long-term interest rates, stifling economic growth.

My concern as a citizen and as a money manager is, Oh my God, at what point does a 'whoa' moment happen to these people who own $30 trillion fixed income instruments?

It's one of the fundamental principles of the stock market: When interest rates go up, stocks go down. And along with financial companies and cyclicals, technology companies - with their sky-high price-to-earnings multiples - should be among the biggest losers in an environment of rising rates.

Banks are employing risky derivatives strategies to goose up returns….the interbank market could freeze up, and one could well have a full blown financial crisis.

There isn't a bank in the world that could withstand a run. They all borrow short and lend long, regardless of what they say.

Like a bank run, a decline in stock prices creates its own momentum.

When bond prices fall, interest rates soar, with painful consequences for all borrowers.

Bond investors are the vampires of the investment world. They love decay, recession - anything that leads to low inflation and the protection of the real value of their loans.

Bonds despite their ridiculous yields will not easily be threatened with a new bear market.

The rating agencies historically actually did a pretty good job rating regular bonds.