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Andres Rueda  

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  • The Only Way DryShips Can Survive [View article]
    It matters in so far as depreciation is a non-cash expense and therefore will not normally send a company into bankruptcy, which is where you are convinced DRYS is heading. DRYS is cashflow positive, event at the pits of drybulk rates, so I don't understand why you are so convinced it will run out of cash and will have to file for bankruptcy. Your convictions don't make sense to me, that's all.
    Jun 10, 2012. 12:12 AM | Likes Like |Link to Comment
  • The big news isn't the €100B, tweets Pawel Morski, it's that the eurozone (Germany) for the first time passed on imposing more austerity as a condition of the bailout.  [View news story]
    It does the folks who buy those bonds at those tiny yields even worse. Interest rates revert to historical norms, and a big chunk of the mark-to-market value of these bonds will vanish.
    Jun 9, 2012. 09:18 PM | 1 Like Like |Link to Comment
  • The €100B Spanish bailout added to EU/IMF pledges to Greece, Ireland, and Portugal brings the total to €486B since 2010, reports Linda Yueh. Got gold?  [View news story]
    You mean, as in "short covering"?
    Jun 9, 2012. 07:57 PM | 2 Likes Like |Link to Comment
  • The big news isn't the €100B, tweets Pawel Morski, it's that the eurozone (Germany) for the first time passed on imposing more austerity as a condition of the bailout.  [View news story]
    I guess the we are all bankrupt / everything is terrible / end of the world will have to wait another day...
    Jun 9, 2012. 06:33 PM | 1 Like Like |Link to Comment
  • The big news isn't the €100B, tweets Pawel Morski, it's that the eurozone (Germany) for the first time passed on imposing more austerity as a condition of the bailout.  [View news story]
    Yipee!!! Print, print, print...
    Jun 9, 2012. 05:32 PM | 8 Likes Like |Link to Comment
  • The €100B Spanish bailout added to EU/IMF pledges to Greece, Ireland, and Portugal brings the total to €486B since 2010, reports Linda Yueh. Got gold?  [View news story]
    Markets rallied last week because stocks were grotesquely oversold relative to "safe haven" bonds. They still are.
    Jun 9, 2012. 04:25 PM | 2 Likes Like |Link to Comment
  • The conventional wisdom says risk markets rally Monday in Pavlovian response to the latest bailout, but the news may be baked in: Spain (EWP) was 10% higher last week, the S&P 500 +4%. Is the rescue even good news? "Spain is the Rubicon that should have never been crossed," says Nicholas Spiro. "A limited bailout for Spain (will) fail to restore confidence in the markets, (and) could fuel fears that more aid will be needed at a later stage (with Italy waiting in the wings)."  [View news story]
    What is the alternative to a rally? That German 10-yr bonds drop even further from the current 1.33% yield when the ECB has again shown its willingness to firehose any and every debt problem in euroland with unlimited amounts of freshly minted cash? Give me a break. Euroland markets are of course primed for a rally.
    Jun 9, 2012. 04:05 PM | 2 Likes Like |Link to Comment
  • The €100B Spanish bailout added to EU/IMF pledges to Greece, Ireland, and Portugal brings the total to €486B since 2010, reports Linda Yueh. Got gold?  [View news story]
    I guess there is no financial crisis, panic, or debt problem that can withstand a central bank's ability to print unlimited amounts of cash. In the latest instance, it seems that the debts of a few Spanish banks will be monetized. The European Stability Mechanism will issue bonds to the banks, and the banks will turn around and pledge these bonds to the ECB in exchange for cash. There, problem solved. Investors willing to purchase "safe haven" bonds at 1.63% for the 10-yr T-bond or 1.33% for the German 10-yr. should be forewarned.
    Jun 9, 2012. 03:37 PM | 7 Likes Like |Link to Comment
  • The Eurogroup statement on Spain: "The loan will be scaled to provide an effective backstop covering for all possible capital requirements ... with an additional margin of safety up to €100B in total ... the Fund for Orderly Restructuring (FROB), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned."  [View news story]
    Ah, so here comes the rally...
    Jun 9, 2012. 03:09 PM | 1 Like Like |Link to Comment
  • The Only Way DryShips Can Survive [View article]
    Actually, Erik, you are wrong in saying that ORIG sold off shares. The recent share sales were of shares held by DRYS. This resulted in no dilution to investors directly invested in ORIG. You need to check your facts. ORIG has in fact authorized a $500 million repurchase of shares and debt.
    Jun 9, 2012. 02:14 PM | Likes Like |Link to Comment
  • The Only Way DryShips Can Survive [View article]
    This article is lame. DRYS is in no danger of going under. Ocean Rig has a contract backlog of $2.9 billion. That's more than the market value of DRYS and ORIG combined! DRYS is also cash flow positive. The "losses" that it suffered last quarter on the drybulk side were accounting losses, resulting from depreciation. The losses on the ORIG side were the result of drillship deployment and repositioning, and are to be expected as a result of the newly inked deals. In fact, ORIG has no uncontracted drillships left for 2012. As to drybulk, rates are highly volatile and will recover. Chinese and other Asian shipyards are hurting for business, as few new ships have been ordered for many months already. The ships coming out of the shipyards now largely were ordered back in pre-2009. I would not have bought DRYS at $123, its peak price in 2007, but I think only a sucker would short DRYS at $2. I just don't see the upside, but Erik for a long time already has been obsessed with shorting DRYS, as if there were no other more promising candidates for shorting that Erik could focus on. He treats DRYS as if it were a rival baseball team, and not a business.
    Jun 9, 2012. 02:06 PM | 3 Likes Like |Link to Comment
  • 6 Reasons Stocks Have Likely Entered A Bear Market [View article]
    I don't agree that we have entered a bear market. A lot of money has left the stock market and gone into "safe haven" government bonds. However, these bonds are now ridiculously expensive. Never in history have they been so expensive. The US 10yr. T-bond is now trading at a yield of 1.45%. The UK 10yr bond is trading at 1.53% per year. The German 10-yr is trading at 1.17%!!!! These yields are well below the rate of inflation for these economies. For some bonds, such as the 2-yr German bond and US Tips the yields are NOMINALLY negative (i.e., negative without factoring future inflation). In other words, panicky investors are PAYING these governments for the "privilege" of lending to them for an extended period of time.

    There are huge risks to these instruments. Interest rate risk is of course the most immediate concern. Imagine what would happen to the value of the US 10-yr if yields jumped to the more historically normal range of 4%-6%. The losses on the mark-to-market for these instruments would be large.

    Then there is the solvency risk, which applies particularly to the US. With a federal debt approaching 100% of GDP in the US (compared to 67% in Spain), would the US be able to sustain Spain's interest payments of 6.5%? Interest on the federal debt would then eat up all of tax revenues!

    So, I don't think there's room for the bond market to get more expensive. In fact, quite the opposite. The "safe haven" bond market bubble is not sustainable. Money will flow back to stocks, and you will therefore not see a bear market in stocks for the time being.
    Jun 3, 2012. 01:18 PM | 2 Likes Like |Link to Comment
  • Long-time bond bull Robert Kessler takes a victory lap and says there's plenty of room for yields to fall further. That's bad news for stocks, he says, as low yields are forecasting lower profits. How to make money with these yields? Banks can conservatively lever 20-to-1, borrowing for nothing to make 15% returns. It's a casino, but the House (the Fed) is paying everybody to play and win.  [View news story]
    There is a fear-driven bubble in government bonds. The tiny yields these instruments offer simply do not make sense. Investors appear to be intentionally losing money, paying the governments of certain countries (Germany, the U.S.) for the privilege of lending money to them for extended periods of time. I assume that many purchasers of these bonds are aware of this, but perhaps are motivated by the intention of unloading these instruments at even higher prices on other investors, instead of holding them to maturity (i.e., the "greater fool" theory). If interest rates spike, the value of the longer duration bonds would be CRUSHED (and not just because the US in particular would then find it next to impossible to service its debts!!).

    As to the issue of "deflation", ok deflation is possible, for maybe one or two quarters. Over the 10 year maturity of a 10-yr T-bond or the 30 year maturity of a 30-yr T-bond, deflation is highly unlikely. An investor who holds the longer term "safe haven" bonds to maturity would be eaten alive by inflation coupled with a subpar yield.

    It will be interesting to see how this all develops.Like all bubbles, the ending will not be pretty.
    Jun 3, 2012. 01:46 AM | 3 Likes Like |Link to Comment
  • Yield Curve Review And Interest Rate Outlook [View article]
    I don't see a recession, particularly here in the US. I am not particularly political, but I think that your party politics are clouding your vision of the economy. You may wish there was a recession, because your preferred candidate would then have a higher chance of getting elected. However, the data indicates a slow but steady recovery in the US right now, and corporate profits are on a roll. The job numbers are weak, but that may just be because there has been a structural change in the economy. Companies are simply more productive, and they make do with less people. As for interest rates, my own forecast is that they will spike. I don't think that deflation is realistic. The fed has given no indication that it intends to skrink its balance sheet, and its policy is currently to keep short term interest rates well below its inflation outlook. This stance has been the same for a few years already, and it is of course inflationary, triggering a possible spike on long-term interest rates once all the brouhaha about the eurozone quiets down.
    May 28, 2012. 09:04 PM | 1 Like Like |Link to Comment
  • Bankia hurtles 24.5% lower in Madrid following news that Spain's government will provide €19B to the lender. Shares had been suspended on Friday ahead of the announcement by Bankia of its recapitalization requirements. The developments are pressuring other bank stocks, with Bankinter (BKNIY.PK) -4.1% and Santander (STD) -1.1%.  [View news story]
    I don't know if the actions of the ECB will lead to runaway inflation. Maybe. It depends on aggregate credit growth. Be that as it may, the problems of certain Spanish banks, of Greece, etc. appear very manageable. I don't understand all the hysterics surrounding the Eurozone. Same tired story for over three years, and yet it seems that some people forget about the fundamentals of specific companies and trade solely around these so-called "macro issues". Does not make a lot of sense to me. The ECB has powerful tools in place to address these problems. I don't understand why some folk insist on placing their bets against the central banks. Seems to me like a trade destined to lose money, maybe not tomorrow but the day after tomorrow for sure.
    May 28, 2012. 04:59 PM | 1 Like Like |Link to Comment