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Donald van Deventer  

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  • International Business Machines: A New Bond Market Ranking [View article]
    The decision on a stock buy back is much more complicated than your comment indicates. For most firms, the big winners are the investment bankers that run the buy back. Everyone else loses.
    Mar 21, 2015. 02:05 AM | Likes Like |Link to Comment
  • International Business Machines: A New Bond Market Ranking [View article]
    Your kind words are always appreciated.
    Mar 19, 2015. 03:54 PM | Likes Like |Link to Comment
  • International Business Machines: A New Bond Market Ranking [View article]
    Thanks for the kind words!
    Mar 19, 2015. 12:47 PM | Likes Like |Link to Comment
  • International Business Machines: A New Bond Market Ranking [View article]
    Thanks for the comment--I think that's a very good strategy but it's one that few very large companies have pulled off outside of the data base arena, where IBM has struggled with DB2.
    Mar 19, 2015. 12:47 PM | Likes Like |Link to Comment
  • International Business Machines: A New Bond Market Ranking [View article]
    jstratt, we have this sentence in the note: "The statistically predicted rating is 2 notches below the legacy rating from firms like Standard & Poor's affiliate of McGraw-Hill (NYSE:MHFI) and Moody's Investors Service (NYSE:MCO)." We do the statistical prediction of ratings (even though we prefer default probabilities) to illustrate where the rating agencies are lagging (and, rarely, leading) market expectations. Most of the lags come with the fallen angels, consistent with your argument. We haven't done the formal analysis but in our notes that cover the top names in the Forbes "valuable brand" analysis, the bonds of the issuer are bid up so high that the credit spread to default probability ratio is below average. I have a lot of sympathy for your arguments. Life as a services company (as opposed to a firm that makes machines) is one that hasn't been rewarding for too many firms. Remember the KPMG spin-off BearingPoint? But the brand image will only fade with a generational change. Thanks for the comment.
    Mar 19, 2015. 12:41 AM | 2 Likes Like |Link to Comment
  • International Business Machines: A New Bond Market Ranking [View article]
    Ernie, good to hear from you. This screen is on the parent. Going forward I will look for IBM Global Finance in the data flow and let you know if there is enough volume to write up. With bond market liquidity trending downward over the last 7-8 years, we see more and more issuers sticking to one legal entity in the bond markets. For credit support, my favorite trick is a web search on "issuer name" and "prospectus supplement"--the credit support should be in the first 2-3 pages.
    Mar 19, 2015. 12:36 AM | 1 Like Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    Thanks WD!
    Mar 18, 2015. 02:32 PM | Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    You are right. Printing money didn't work for Zimbabwe (I have a 1,000,000,000 Zim dollar bill) or Ecuador, both of which "dollarized" after the government's promise to pay wasn't worth the paper on which the promise was printed.
    Mar 18, 2015. 01:09 PM | 10 Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    Right you are. I encourage everyone to read the Trustees' report and Gary King and Samir Soneji's paper "Statistical Security for Social Security," Demography, 2012.
    Mar 18, 2015. 12:40 PM | 1 Like Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    All the more reason why a "pay as you go" pension scheme (where the young give money to the old and hope that when the young become old someone will pay them) can be very deceptive for those without the ability to do the projections in the trustees report. That's Kotlikoff's main point.
    Mar 18, 2015. 12:38 PM | 10 Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    The readers of SeekingAlpha are smart enough to decide for themselves whether or not it's "silly" to tell taxpayers that the main fund for social security will have zero assets in 2033. That comment, in a report signed by Secretary of the Treasury Jack Lew, is on page 3 of this report: http://1.usa.gov/1xeQ7lX
    Mar 18, 2015. 12:09 PM | 8 Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    I should point out that the Secretary of the Treasury, a Democrat, officially signs off on the trustees' report and the forecast that the assets of the fund will be exhausted (go to zero) in 2 decades.
    Mar 18, 2015. 12:03 PM | 10 Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    As Prof. Kotlikoff explains in his book on this issue, Alan Greenspan helped realign benefit levels in the mid 1980s when projections were perhaps worse than they are now. You're right...there's no Alan Greenspan/John Wayne in this town today.
    Mar 18, 2015. 11:52 AM | 5 Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    One thing it would have been useful to include in your article is the annual estimate from the trustees of the social security system about the date when the assets in the social security fund are exhausted (yes, go to zero). From memory, from last April's reports, that date was about 2033. The trustees usually put this estimate in the executive summary of their report. At that point, the trustees explain, benefits will need to be cut 25% to all beneficiaries. An independent analysis by Prof. Gary King of Harvard and Prof. Samir Soneji of Dartmouth, using state of the art mortality modeling, estimate that the trustee's report may be off by $1 trillion or so, but they're in the ballpark.
    Mar 18, 2015. 11:50 AM | 7 Likes Like |Link to Comment
  • One Thousand Scenarios For The U.S. Treasury Curve [View article]
    Steve, thanks for the kind words. The famous paper by Heath Jarrow and Morton explains how to construct a simulation so that it will correctly price current bonds for any assumption you make about the risk factors driving bond prices. We did a statistical analysis from 1962 that showed 9 factors (points on the yield curve) fit very well. They vary from the short rate to the 30 year point on the yield curve. Other points are 1, 2, 3, 5, 7, 10, 20 and 30 years. We assume those factors vary as they have in the past and that their volatility rises and falls with rate levels. The "normal" level of rates would be the expected actual rate levels that come out of the simulation. We'll have more on that next week. Thanks again.
    Mar 13, 2015. 11:43 AM | Likes Like |Link to Comment
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