News

Moore School brings fixed income experts to Charleston for penetrating analysis

June 12, 2012

Stephen Blank

Tad Philipp

Jean Helwege

Robin Grieves

Some of the top names in the fixed-income field gathered in Charleston, S.C., April 20-21, 2012 at the Darla Moore School of Business Fixed Income Conference. U.S. investors, fund managers and economists discussed the latest developments and trends in the world’s largest capital market. Below are some highlights from the University of South Carolina event, which focused on credit, treasuries and real estate.

‘Zombie’ commercial real estate borrowers set to haunt landscape

The U.S. economy faces further devastation from the crash of the real estate bubble as commercial real-estate borrowers who took out mortgages after 2007 now need to refinance. Stephen Blank, senior fellow with the Urban Land Institute, said that two-thirds of these loans are not going to qualify for refinancing. He said the market will need $300 billion for commercial real estate financing per year through 2017. Tad Philipp, director of commercial real estate research with Moody’s Investors Service, called many of these borrowers, “Zombie commercial real estate borrowers who are too good to default, but not good enough to refinance.”

Seven 1,000-year floods

After the fall of Lehman Brothers in 2007, the financial world went through what Blank called “34 days of hell,” a time that he said the market experienced the equivalent of seven 1,000-year floods. Nic Perkin, co-founder and president of The Receivables Exchange, said investors continue to hoard cash and are only investing in safe, short-term assets such as Fortune 10 company receivables.

US Economy not at risk from contagion

Many experts and investors are worried about how the economic troubles in the European Union will affect the United States. Moore School finance professor Jean Helwege is not worried about the risk of contagion. “If Greece didn’t exist, Spain would still have problems,” Helwege said. “After all, we didn’t ‘catch’ England’s problems in the 1980s.”

Easy money and the weak economy

A panel of experts on U.S. government bonds that included Moore School finance professor Robin Grieves, considered whether the Federal Reserve might start to pull back from what they called “extraordinarily easy money policies.” Gary Li, an economist with the S.C. Retirement System, said thoughts of tightening before 2014 would be premature for what is still a weak economy. “It could be worse than Japan in its lost decade,” Li said.