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  • GE, Goldman Bond Spreads: Unrealistic and Unsustainable
    Based on the thinking behind the article, would you expect him to be invested any other way? Are you as skeptical of somebody who's bullish and long?
    Nov 15 10:09 am |Rating: 0 -1 |Link to Comment |View article
  • GE, Goldman Bond Spreads: Unrealistic and Unsustainable
    I suggest that much of the discrepancy identified by the writer is due to a change in the overall cost structure of CDS in a world of heightened risk aversion.

    I am no expert in CDS. That said, I find it impossible to believe that the heightened risk aversion that permeates every other part of the financial economy has left this part untouched. Just as banks' appetites for risk in their loan portfolios has decreased markedly, so should that of sellers in the CDS market. In the face of the failure of AIG, the risk profile for CDS should certainly be different than it was before.

    The result of this should be greater costs to insure the debt of all companies. I would love to see a comparison of the "average" CDS rate today vs. three months ago, six months ago, and a year ago.

    Also, I advise readers to be mindful, when making investment decisions, of the markets behind the numbers. The CDS market is extraordinarily thin, with very few sellers, especially when compared to the corporate bond market. The thinner the market, the more likely pricing errors will occur. I suggest that any discrepancy not due heightened risk aversion is more likely due to a pricing error not in the bond market, but in the CDS market.
    Nov 12 07:48 am |Rating: +3 0 |Link to Comment |View article
  • TARP vs. Non-TARP: Investing with Uncle Sam at a 60% Discount
    The preferreds are indeed interesting - take a look at the PGF, the dividend of which has been impaired (dropping from about 0.125/month to .108), now yielding about 9.5% and priced about 27% lower than its August average, (when the yield was a bit more than 8%), and 37% less than its average from the first part of the year (when the yield was about 7%). Assuming the big banks' and insurers' preferred dividends survive (which they must, since losing those dividends are would crush their ability to raise additional capital), this fund should have a nice capital gain; if not it still provides a monthly income stream.

    Of course, yesterday it lagged the overall market by more than 8%.

    One quibble: don't expect 3-month LIBOR to grow at any point in the near future; expect it to shrink.
    Oct 29 08:26 am |Rating: 0 0 |Link to Comment |View article
  • Why Is Everybody Selling as Buffett Is Loading Up?
    Because he's smarter than us.
    Oct 06 11:48 am |Rating: 0 0 |Link to Comment |View article
  • GE Dilution Questioned
    Russ - do you know how warrants work? BRK isn't putting another dollar into GE until it decides to, which is VERY likely to be within a couple of months of the expiration of the warrants.

    The deal brought $15B in, including $12B from the common offering, at an overall cost which may or may have been better than a secondary alone.
    Oct 03 08:22 am |Rating: 0 0 |Link to Comment |View article
  • Does Warren Buffett Think Goldman Is More Creditworthy Than GE?
    Same as with GS, this deal is obviously good for BRK. But it's not a bad deal for GE, either. It provides cover for them to price their secondary common offering, which is 400% of the BRK preferred, as opposed to 50% (expanded to 100%) for GS. The question when evaluating it from GE's side is, would it have cost less to raise capital purely from a common offering? Not bloody likely.

    The three-year-to-call part is a material difference, and I'd guess is there because GS was cheaper on an expected growth basis. So in GE, BRK expects to make less on the appreciation of the warrants, so it requires additional returns from the preferred to make up the difference.
    Oct 02 08:07 am |Rating: 0 0 |Link to Comment |View article
  • Adding to My GE Position
    pennystocks - wanna bet?

    "The big, BIG problem I have with GE is the 547 BILLION dollar debt. The market cap is only 264 Billion..."

    First, I think you misplaced a decimal - GE's debt is on the order of $54 billion. But so what? GE also has $145 billion in assets.

    "GE is going to have to spin off the good businesses debt free and let the other businesses crash and burn!"

    The sky is falling! The sky is falling!
    Jun 27 15:35 pm |Rating: 0 0 |Link to Comment |View article
  • Valuing GE (It's Cheap)
    g7enn wrote: "GE is virtually bankrupt. Check out it's Cash Flow..."

    You might want to look up "bankrupt." Then look up "cash flow." Then, just for kicks, see what you can find on "long term." See if you can put it all together.

    Here's a hint: 2007 earnings - $22.2 billion; 2006 - $20.7 billion; 2005 - $16.7 billion.

    Bottom line.

    "It's [sic] cash flow is coming from its borrowings."

    Really? I'm looking at cash from operations, which appears to be up some 65% in the last 5 years.

    "It's cash flow for 2007 was under $2M."

    Right. POSITIVE cash flow. Hardly the sign of a pending failure.

    "What happens to GE as the financing and credit situation worsens?"

    It continues to lose money (mark-to-market) from certain investments, and continues to generate ENORMOUS amounts of cash from operations. And at the end of this credit problem, there will be some big winners - who's to say GE ends up worse than average?

    "Debt/Equity ratio is 4, way too much debt."

    And Goldman's is over 10. Do you also think Goldman's about to fail?

    "Where is it going to get the money to finance operations? From Bernanke?"

    Pay attention. Operations generate ENORMOUS amounts of cash.

    "If you fail to understand the above then take a look at its stock price, going the way of Bear Stearns and why are investors buying so many puts on this company if it wasn't about to go bankrupt?"

    Here's a newsflash for you: for every put buyer who thinks the company's going down, there's a put SELLER who thinks the opposite. Better question: why is short interest a measly 1.2% if so many investors thought GE was in such dire straits?
    Jun 23 09:03 am |Rating: 0 0 |Link to Comment |View article
  • The 20 Highest of the High-Yield Dividend Aristocrats
    Don't forget to consider Countrywide as an entry for BAC. It's running about 90% of the deal's value, which I don't think is enough of a spread to cover the risk involved, though there has been no indication of BAC backing away. If you're interested in BAC and want to play arbitrageur, consider CFC if the spread widens.
    Jun 19 01:32 am |Rating: 0 0 |Link to Comment |View article
  • The 20 Highest of the High-Yield Dividend Aristocrats
    Be very, very careful with this list. Here be some monsters.
    Jun 18 15:51 pm |Rating: 0 0 |Link to Comment |View article

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