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Wednesday, May 20, 2009
6:12 PM TweetThis
  • Burned by Obama, fund managers grow wary: "The sad thing is it impacts the manufacturing sector and the companies that have legacy liabilities directly. It will be nearly impossible, or much more expensive, to get secured financing."
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This news story has 25 comments:

  •  
    And some don't claim that moral hazards exist. PIMCO, once again, leading the discussion.
    May 20 06:24 PM | Link | Reply
  •  
    We're just following the 'rule of law' in America. That is, the people with the power make the law. Well, debtholders can HOPE!
    May 20 06:43 PM | Link | Reply
  •  
    There has been some commentary on SA that senior debt often gets subordinated in bankruptcy. If bondholders were going to get shafted anyway, I can understand why they cratered when BHO roared. Otherwise, someone with balls needs to take these fascists to court. Any bankruptcy lawyers here?
    May 20 08:05 PM | Link | Reply
  •  
    Where is the Supreme Court? Sitting with their thumbs up their asses, that's where.
    May 20 08:11 PM | Link | Reply
  •  
    I was reading through the entire story and the opposing debtholders are the minority, so their voting powers will be less naturally. However, it is the way the Supreme Court that handled the issue, etc by threatening for the names of debtholders (and I remember reading that these debtholders got death threats, though I may have remembered wrong) and throwing the case out so easily, that disgusts me most. What's the point of investing in USA when you get shafted when the government wants to.

    On May 20 08:05 PM The Geoffster wrote:

    > There has been some commentary on SA that senior debt often
    May 20 08:39 PM | Link | Reply
  •  
    One think I am not clear on relating to Chrysler...did the UAW actually receive the ownership? Or does the equity actually go to the retirees via the PBGC?

    If THE UAW actually receives it, that is piratical wealth transfer on a whole unacceptable level.
    May 20 08:48 PM | Link | Reply
  •  
    Personally I believe the government actually "robbed" the investors in broad daylight. Whatever the legal outcome of the BK Court, and the subsequent due process afforded under the rule of Law, the damage had already been done. Investors' confidence is now shaken, which could be irreparable.
    May 20 08:55 PM | Link | Reply
  •  
    As one who owns a significant amount of GM bonds in my self-directed retirement plan, purchased at about par in the good old days when GM was a pillar of American industry, I must say that the recent events force me to re-assess how I invest in the future.

    The message is that it is now more risky to hold debt in any US industrial company with a unionized workforce or with large pension and healthcare costs. Unfortunately, this means many of the old manufacturing stalwarts which have defined America for generations, such as BA, CAT, DE, WHR, etc.

    The administration's failure to make whole the bond holders in the nationalized auto companies, whilst expending trillions to make whole the banks' bond holders, will result in investors shunning industrial companies and favoring banks. The law of unintended consequences will again rear its ugly head, hasten the demise of manufacturing, and cement the ascendancy of financial services. I doubt that this is in our long-term national interest.
    May 20 09:13 PM | Link | Reply
  •  
    Thanks for the info. I was looking at WHR recently...How can I figure out which companies these are?

    On May 20 09:13 PM prudentinvestor wrote:

    > As one who owns a significant amount of GM bonds in my
    May 20 09:20 PM | Link | Reply
  •  
    I don't think companies with unionized workforces will worry about raising money from hedge funds... they'll be able to get all they want from the government
    May 20 09:21 PM | Link | Reply
  •  
    Yes, but the current debtholders will worry. Not to mention stockholders who are traditionally end of the line.

    On May 20 09:21 PM Tricky wrote:

    > I don't think companies with unionized workforces will worry about
    May 20 09:25 PM | Link | Reply
  •  
    On May 20 09:13 PM prudentinvestor wrote:

    > As one who owns a significant amount of GM bonds in my self-directed
    > retirement plan, purchased at about par in the good old days when
    > GM was a pillar of American industry, I must say that the recent
    > events force me to re-assess how I invest in the future.
    >
    > The message is that it is now more risky to hold debt in any US industrial
    > company with a unionized workforce or with large pension and healthcare
    > costs. Unfortunately, this means many of the old manufacturing stalwarts
    > which have defined America for generations, such as BA, CAT, DE,
    > WHR, etc.

    prudentinvestor, I agree.

    In fact, as horrible as it is to say it, I feel very leery about investing in any American company at current valuations. I'm planning to invest exclusively in ETFs -- commodity ETFs, gold/silver ETFs, inverse ETFs, and foreign ETFs (Brazil and China especially) until things straighten out here at home.
    May 20 09:27 PM | Link | Reply
  •  
    Hope is a fiat currency I no longer accept. It seems to be printed in massive quantities exactly at the time when it's least helpful.


    On May 20 06:43 PM Poor Texan wrote:

    > Well, debtholders can HOPE!
    May 20 09:38 PM | Link | Reply
  •  
    What exactly is the Supreme Court supposed to do if nobody brings a case to it?


    On May 20 08:11 PM Moses wrote:

    > Where is the Supreme Court? Sitting with their thumbs up their asses,
    > that's where.
    May 20 10:12 PM | Link | Reply
  •  
    Worst case scenario when looking for a company to invest in:
    1. Based in California, Michigan, or New York
    2. Unionized

    On May 20 09:21 PM Tricky wrote:

    > I don't think companies with unionized workforces will worry about
    > raising money from hedge funds... they'll be able to get all they
    > want from the government
    May 20 10:17 PM | Link | Reply
  •  
    I agree with your assessment that this market has become so politicized that past experience has no value in trying to understand an investment's potential.

    I have liquidated my portfolio in the last week and am only holding gold, oil, China, and India ETFs.

    Betting against the dollar vs the Euro with ETFs.

    Preparing for at least a 5 year period of stagflation and then mediocre growth after that.


    On May 20 09:27 PM Missing_Link wrote:

    > On May 20 09:13 PM prudentinvestor wrote:
    May 20 10:59 PM | Link | Reply
  •  
    The whining continues.
    May 20 10:59 PM | Link | Reply
  •  
    Not to say I called it, but:
    seekingalpha.com/artic...
    May 20 11:35 PM | Link | Reply
  •  
    Yes its tough on existing senior bondholders, and yes, part of the capital contract has been debased. However, lets not ignore the fact that going forward, this re-writing of the rules has serious adverse consequences for the entire US economy.Future potential bond investors are going to be demanding much tougher terms and rates......if indeed they are willing to lend to some companies/sectors at all. Therein lies the self-regulating nature of the global economy. The Government may think it can muscle in and bail out everything in sight, but it only hastens the long term decline of the US and brings forward the day of reckoning with the currency and interest rates.
    May 20 11:47 PM | Link | Reply
  •  
    The Obama Administration is by far the most dishonest Govt we have seen. Not a sentence comes out of The White House untill it has been spun, re spun and polished to the point where the fact is hidden somewhere behind the glare.
    May 20 11:52 PM | Link | Reply
  •  
    I am not sure if it is dishonest or just clueless.
    May 21 12:02 AM | Link | Reply
  •  
    Well, he's smart enough to uncheck the "clueless" option, so we can safely assume he knows what he is doing. There is no fault to try to protect workers, but there is a cleaner and better way to do it. Not the way he did it though.

    On May 21 12:02 AM Windsun33 wrote:

    > I am not sure if it is dishonest or just clueless.
    May 21 12:17 AM | Link | Reply
  •  
    Gimmicky is perhaps another word for it.


    On May 20 11:52 PM The Aft Deck wrote:

    > The Obama Administration is by far the most dishonest Govt we have
    > seen. Not a sentence comes out of The White House untill it has been
    > spun, re spun and polished to the point where the fact is hidden
    > somewhere behind the glare.
    May 21 12:58 AM | Link | Reply
  •  
    Before the election, a lot of the fringe "christians" were chanting about "Obamageddon". They may be right, but for all the wrong reasons.

    Every time I think we cannot spend more, or get the deficit any worse - we spend more, and the deficit goes up. What is starting to worry me even more is that nobody in the media or in the "loyal opposition party" (presumably the Republicans) seems to be noticing.

    The one good thing about it is that it is sending my gold mining stocks up.
    May 21 11:06 PM | Link | Reply
  •  
    Windsun and AftDeck,
    Obama is an attorney; any advisor should only have to say that the traditional process in bankruptcy often finds that investors of different assets (equity, unsecured, secured) are not "parri pasu".

    Unfortunately, to the current administration, "parri pasu" means that two investors gave the same amount to the Democratic party and BHOs campaign.....precedent is set by donation, not by law!
    May 22 12:43 AM | Link | Reply
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