Legendary hedge funder Raoul Pal explains how a 'doom loop' in corporate credit is on the verge of upending the entire pension system

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Legendary hedge funder Raoul Pal explains how a 'doom loop' in corporate credit is on the verge of upending the entire pension system
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The former hedge fund manager and founder of Real Vision thinks the Fed will have to resort to QE to save the US pension system.

market in the US and globally — because of the sheer amount of issuance — is getting somewhat problematic. Corporate debt has doubled since 2008."

For context, consider that corporate debt offers higher yields than US Treasurys due to the excess risk involved. But this mounting situation puts the pension system in a precarious position. Those plans and funds are holding a boatload of these securities. What happens next isn't pretty — and this is where Pal sees the potential for a cataclysmic sequence of events taking place.

But Pal doesn't think the junk bond market will be able to absorb the deluge of supply. And he thinks the massive shunning of these securities could potentially freeze the entire junk bond market. A recipe for disaster.

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