Have No Credit Fears, the Bulls Partied Hard at Milken Shindig

(Bloomberg) -- A meeting arranged by the Junk Bond King himself would be expected to lean fairly risk on. What’s striking about the 21st Milken Institute Global Conference is how many credit market participants still sound that way, despite creeping concerns about debt, leverage and what happens when the cycle ends.

"I’m broadly constructive on credit and equity, because there is global growth. Fundamentals are sound," said Michael Hintze, founder and CEO at CQS.

The billionaire hedge fund manager’s enthusiasm was shared by many others at this week’s Beverly Hills confab. Tax reform and regulatory rollbacks are juicing an economy that was already buoyant. Whether or not pro-cyclical stimulus fans growth too hot is a worry for the future -- but credit markets are still dancing.

"We are supposed to worry about an inverted yield curve," said Robert Kricheff, portfolio manager and global strategist at Shenkman Capital. "Lincoln got shot and World War I started ... it may be a signal, but it’s not something to panic about."

Geopolitical risk rattled some delegates, mostly for its potential to dampen economic growth through more trade wars. One of the biggest bears, TCW’s Tad Rivelle, warned of a foundation cracked by a mountain of debt accumulated through years of easy monetary policy.

But the tone of this year’s Milken was predominantly upbeat. Credit markets will probably enjoy another few years of smooth sailing, unless the Fed tightens too much too fast, in which case event-driven investors are ready to pounce.

"We are having a party at Apollo these days," said Jim Zelter, co-president of Apollo Global Management.

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