'Big Short' Investor Greg Lippmann Bets On Partially Paid CLOs Amid High Interest And Hard Landing Fears: 'Buy The Bad At The Horrible Pricing'

Greg Lippmann, founding partner at LibreMax Capital, is gearing his investment focus towards resilient assets, anticipating a harsh economic landing.

Lippmann is banking on partially paid-down collateralized loan obligations (CLOs) as a reasonable investment in the face of persistently high-interest rates, reported Business Insider.

The mounting pressures on commercial real estate, including high-interest rates, diminished credit availability, and an office vacancy upswing, have led to a 5% delinquency rate in office loans last month.

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Lippmann, however, sees potential in commercial mortgage-backed securities, noting the “indiscriminate selling” in the market. He believes that investors who use technology and data to separate the bad bonds from the worst can profit.

“It’s our view that the whole sector is priced for horrible, and some of the bonds are going to turn out to be atrocious. But other ones are going to turn out to be medium to bad. And you just buy the bad at the horrible pricing. It’s going to go up,” he said.

Lippmann, who gained fame for predicting the 2008 housing market crash, sees corporations as vulnerable entities in the current economic climate, in contrast to the 2008 crash that was fueled by consumer debt.

He suggests that government reforms have fortified consumer financial health, while covenant-lite loans have led firms to accrue more debt. With another Federal Reserve interest hike expected this year, floating-rate debts common among firms will only exacerbate.

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