Brutto

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    • Thu Oct 9th 16:38 PM | Rating: 0 0
      Commented on:
      Fear and Value: Together Again
      Yields as a measure of value only work if they are sustainable.

      The statistics are distorted by the fact that Financial stocks have been major contributors to the yield, and we all know what is happening to them.

      Maybe we are just going back to the good old days: Equities = higher risk = higher yield. In a depression you can forget inflation, for a while at least
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    • Mon Sep 15th 18:34 PM | Rating: 0 0
      Commented on:
      Why Buy High Yield Bond Funds?
      The problem for many high yield bonds now is not just the default rate (where anyway every fund manager will argue that he has "unique insights" in picking solid businesses) but refinancing risk - the borrowers can pay interest, but the principal of many of the recent bond vintages cannot easily be repaid from company cash flows: the bonds were placed in the expectation that they could be redeemed by replacing them with abundant cheaper finance a few years down the line, or in conjunction with IPO's of the borrowers.

      So crunch time is delayed until the final redemption date. Investing now is a bet that credit conditions will get back to where they were: your call if you think this is likely, but many borrowers don't really have a plan B.
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    • Mon Sep 15th 18:09 PM | Rating: 0 0
      Commented on:
      Law of Supply & Demand Is Dead for Gold & Silver
      Manipulating the commodities market to bulk up banking profits seems a pretty complex undertaking to me, especially given the incompetence of the banks and monetary authorities in other matters - I doubt they are up to it, and it certainly didn't work for Lehman.

      Cutting interest rates is a much simpler strategy of instantly strengthening bank balance sheets and profits, and one the Fed is used to executing - so watch for a rate cut, possibly this week.

      Still, gold is a better store of value than greenbacks just now, so probably worth buying: maybe worth waiting until end of September, when some hedge fund bets have been shaken out by quarterly redemptions ...
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    • Sat Sep 13th 17:48 PM | Rating: 0 0
      Commented on:
      Alternative Buyers for Lehman (and Not Just the Usual Suspects)
      Whenever I hear anything from "broker sources", I can usually safely assume the opposite - they gossip like fishwives, usually about matters they don't fully grasp: perfect for spreading misinformation.
      View article »
    • Fri Sep 12th 14:06 PM | Rating: 0 0
      Commented on:
      BAC's Ken Lewis Mulls Another Deal as Lehman Reaches Brink
      Which CEO of a leading American Bank said: "I've had all the fun I can stand in investment banking right now" when things started to implode last year?

      First to answer correctly gets a LEH share. Second prize: two LEH shares.

      Write to Kenneth Lewis, c/o Bank of America to claim your prizes.
      View article »
    • Fri Sep 12th 14:02 PM | Rating: 0 0
      Commented on:
      Let Lehman Fail
      Good article. As stated, the writing was on the wall for LEH since the demise of Bear Stearns. Fuld had plenty of time and opportunities to recapitalise LEH and passed to protect his position, always hoping that a better deal would come along later.

      If LEH gets rescued now with a Fed backstop, it will be open season for buying the bonds and shorting the stock of the next victim (Merrill, say) in the expectation that the Fed will have to step in again and effectively guarantee the debt.

      And again when the next domino falls,... and again...until they run out of credible buyers that can be strong-armed or bribed into fronting these bailouts.
      View article »
    • Thu Sep 11th 15:25 PM | Rating: 0 0
      Commented on:
      Lehman: Nobody Knows Anything
      One thing is for sure: Fuld has had it. For the last six months he has thrown away every opportunity to recapitalise LEH in the hope something better would come along later. And LEH could have possibly kept limping along if it weren't for the rating agencies now threatening a downgrade: that will be the nail in the coffin.

      The Fed's problem is to find another "credible" stooge to stand in for what JP Morgan did when taking over Bear Stearns and to front a rescue with a Fed backstop. Giving a Fed guarantee to a foreign buyer just wouldn't look so good...

      Goldman Sachs would have loved to do this if it weren't for the fact that they worry about being dragged down: there are enough questions about their own exposure, particularly as they have been messing about with commodities trading for the past quarter.

      Time will tell...In the meantime Fuld is lucky not to be lynched by Lehman staff, who own a third of the stock.
      View article »
    • Mon Sep 8th 18:17 PM | Rating: 0 0
      Commented on:
      Fannie/Freddie Bailout 'Disastrous Fiasco'
      To User 125027; the unlimited checkbook you mention, would that be the US dollar printing press that has been overheating since 2001?

      In the long run you may be right: The liabilities taken on by the government may be balanced by the "assets". Problem is, as John Maynard Keynes pointed out, in the long run we are all dead. In the meantime ask Bill Miller how well he's done by taking a medium term "value" view on these stocks.

      The scary thing about this particular socialisation of losses is that it was deemed necessary despite everyone being reassured, not so long ago, that the Fed would effectively stand behind FNM and FRE debt if push came to shove.

      It seems that even this wasn't good enough any more for investors - they needed the security of seeing the junk physically on Uncle Sam's balance sheet. Great vote of confidence....
      View article »
    • Mon Jun 30th 17:15 PM | Rating: 0 0
      Commented on:
      Timber ETFs...Without the Timber?
      Good write-up, George. There is a more general lesson here also, which is to look carefully at the components that make up the more esoteric flavor-of-the-month ETF's: think solar, water, renewables, etc.

      More often than not the underlying stocks are only tangentially related to the actual asset you are looking for, or there are so few pure-play stocks that you can afford to research and cherry-pick among the top five names and get good sector exposure.
      View article »
    • Thu Jun 12th 06:38 AM | Rating: 0 0
      Commented on:
      NYT Smears David Einhorn, Again
      Well said, Whitney! If Einhorn is dead wrong, we should thank him for making LEH affordable and load up on the stock (or, better, on the convertible) for the long term. If he is right, we should feel sorry for LEH employees who have a much higher proportion of their assets tied up in the firm than your average fund manager.

      Either way, we know we are at an inflection point in the economy when press and governments have to go on a witchhunt for speculators and dark powers (those bad,bad hedge funds) as a scapegoat for market forces: not very rational, and more of a psycho/sociological phenomenon a this stage of the cycle.
      View article »
    • Thu May 22nd 13:18 PM | Rating: 0 0
      Commented on:
      Penn West Energy Trust: My $50 Price Target
      With regard to hedging, PWE has hedged 42K barrels of its daily production of 109k barrels (excluding Natural Gas) with a cap of $81 until the end of 2008. Assuming they can sell the uncapped 67K BOE at an average of $120, they should achieve an average income of $107/barrel though to December. Jack, presumably your analysis already reflects this.
      View article »
    • Wed May 21st 18:09 PM | Rating: 0 0
      Commented on:
      Hedging Your Bet With American Capital Strategies
      Instead of buying ACAS, have a look at their European subsidiary, a mini-me version, European Capital (ECAS.L) quoted on the London Stock Exchange. www.ecas.com/
      It was IPO'd by Citibank at EUR 10 last year and is currently priced at EUR 5.75. A price-to-book of less than 0.7 and a yield of 11 per cent leave plenty of safety margin for slip-ups in their portfolio, which in any event is not excessively exposed to the toxic covenant-lite LBOs which will hit a wall in the next few years. Plus, the very capable and driven ACAS COO, Ira Wagner, has nailed his colors to the mast of that particular ship, and ACAS is really motivated to support the ECAS share price for the reasons outlined above (SFAS 157) - they have even announced a share buy-back. (Disclosure: I am long ECAS with a base price of around EUR 5.45)
      View article »
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