James Reynolds, Loop Capital's founder, chairman, and chief executive.

BEVERLY HILLS, Calif. — If bond investors aren't worrying, they probably should be, according to members of a Milken Institute Global Conference panel.

The panelists Tuesday discussed when the next downturn might occur, whether historical economic theories apply in today's world, and where value investments exist in this stage of the economic cycle.

Although the recovery is long in the tooth based on historical boom-bust cycles, the consensus on the panel was that the economy is in a mid-to-late economic cycle.

"If a bond investor tells you he is not worried then he is not being fully cognizant of what is going on around him," said Tad Rivelle, chief investment officer of fixed income for TCW.

The market is "getting tougher and tougher," said James Reynolds, Loop Capital's founder, chairman, and chief executive.

When you look at the fixed-income markets, you see that yields are low and the risk premium is stretched, and turn your focus to the credit markets, Rivelle said.

"As long as the credit markets are willing to extend the frontiers of credit, it is going to extend the cycle," Rivelle said.

Rivelle said TCW sees the economy as being at the latter end of the growth cycle, but no one can read the bell and tell exactly when it will end, he said.

When deleveraging occurs, which Rivelle said is hard to call, "you hope that you have been cautious in prior cycles."

Given bond yields "you really have to tread lightly to find value," Reynolds said.

The arena has been marred by bankruptcies, Johnson said, and "we are looking at situations like Detroit and Puerto Rico where there has been mismanagement."

In terms of where opportunities lie, Johnson said bond-focused investors are scouting opportunities in shale-heavy states were fracking technology can be employed.

Energy-rich cities and states, particularly those with shale, are viewed favorably by Loop, which sees that resource as a healthy revenue stream for governments, Johnson said.

"When we are thinking of buying bonds, we want to see what is going on around shale," Johnson said. "It is like when you visit Walmart headquarters in Bentonville, Ark. You can sort of imagine what Bentonville looked like before Walmart. But now you see Rolex stores."

Loop's private equity clients are also looking for fixed income opportunities around corporate bonds of companies involved in fracking, Reynolds said.

"We also look at real estate investment trusts, really focused on commercial strips around these areas," he said.

Loop is targeting states where shale deposits - and the potential - have not been factored in. For instance, Reynolds said, New York and Ohio are just getting into it while Texas and North Dakota are in the thick of it. Pittsburgh is benefiting from the Marcellus formation located in the Appalachian Basin. Conversely, in California and Ohio fracking has been controversial, he said.

Enthusiasm over the ongoing potential of fracking shale deposits was tempered by concerns about volatility in the markets and when the next downturn might occur.

Rivelle used historical examples of irrational markets to explain why he contemplates at such times whether it is unusual or if the market is communicating that something more significant and profound is about to occur.

"We are finding very interesting opportunities in the distressed markets," said Steven Shapiro, founding partner and senior portfolio manager, GoldenTree Asset Management LP.

GoldenTree's view in general is that the markets are in the mid-to-late stage as they are seeing higher leverage on deals.

"Everything people said they would not do in 2008, they are doing again," Shapiro said.

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