AlexL.

CEF Weekly Review: Real Estate Extends Gains

Man I think I need to refresh my page more often... totally missed your comment before posting.


On Sep 21 01:58 PM Joe Eqcome wrote:

> Follow Up on BCT
>
> In a conversation with Blackrock with regards to BCT, its original
> objective was to liquidate the CEF at the original issue share price
> of $15 per share at the end of 2009. However, this was not a guarantee.
>
>
> The trust will be liquidated now on or about October 30, 2009 at
> NAV--which is now approximately $12.42 per share.
>
> Assuming you buy 200 shares of BCT at the prevailing price of $12.25
> per share and pay a commission of $10 per share your average cost
> would be $12.30 per share. Assuming you get approximately $12.42
> per share liquidation distribution, the liquidation payment would
> represent a $.12 per share increment over your embedded cost. <br/>
>
> This would be a return on your money of less than 1% for the holding
> period of approximately a month and a week. However, the distribution
> would be a return of capital, i.e. you wouldn’t have to pay taxes
> on the increment distribution.
>
> There are too many moving parts and a low projected return for this
> to be an interesting arbitrage. I’m sure there will be some liquidation
> costs that might reduce the liquidation distribution.
>
> The stated objective of returning to investors their original IPO
> invested capital of $15 per share and then placing a caveat that
> they just might not seems a little misleading. A more accurate and
> honest objective would have been, "protection of the original shareholders'
> invested capital".
>
> And they didn't even do that--let alone investors getting back their
> original $15 per share.
>
> Yes, Virginia, it was too good to be true.
>
> Joe Eqcome

CEF Weekly Review: Real Estate Extends Gains

After having read the fact sheet and several press releases from BlackRock regarding BCT, I believe that the $15 to be returned to shareholders at the maturity of the trust (they announced on June 3rd that final distribution will take place on Oct 30th) was solely based on the initial offering price of the fund. The main objective of the fund was capital preservation (i.e. the $15 NAV), which it looks like they were unable to achieve as 9/18 NAV was $12.42. Doesn't look like there is much to get excited about on this one.

Once again, thanks for the comperehensive CEF coverage...

Weekly Volatility Tracker: Implosion in S&P 500 Volatility

Great info! Nice to see someone with substance and research on SA...

One point though. In Table 5, don't you need to add 2 more lagged VIX lines to better correlate with the 60 and 90 day hist. vol.?

Trading the Volatility Index - A Bearish Approach

You need to study up on the nature of VIX options a little more before posting trade suggestions on it. Your assumption of a 72% return at Aug expiry if VIX is at 32.5 is highly flawed. I understand your math (750/435), but you CANNOT simply assume the back month will be trading at $7.5 if spot VIX is 32.5. The Dec Call will be priced off of the Dec VIX future, and if you look at historical prices (esp in the past two years) you will find many cases where back month VIX options traded below the "intrinsic value" that you would attribute to vanilla options.

Basically, ChrisMcK summed it up perfectly above. The reason most brokers wont let you trade VIX diags is because they pose unlimited risk, a risk that you don't seem to be properly accounting for.

Hedge Fund Start-Ups: Major Industry Players Rising from the Ashes

The guys that previously ran hedge funds and are starting up new ones are simply trying to escape high water marks... very enterprising bunch indeed.

I.O.U.S.A. Movie Is Well-Done and Informative

Does no one besides me find it extremely ironic (and at times bordering on enfuriating) that the man behind this project (Peterson) is the same person who exploited the same cheap debt that he now rails against in order to enrich himself and the other Blackstone insiders?

It's easy to see how PE firms for years were able to take advantage of the Equity vs. Debt arbitrage. Sell Debt (and pay 6-9% interest) to buy equity and pledge the FCF to back your creditworthiness. If the project fails, its the company, not Blackstone, which gets downgraded to junk. This does not have any effect on future BX buyouts. The concept is very similar to an individual buying an income producing asset (like a farm), defaulting, and then blaming the land for being unable to produce enough to stay afloat. This is of course not the case in the real world, as the farmer would lose his lose and all of his other personal assets. After a BX owned company defaults, the company's assets get pledged to pay down the debt, and Blackstone walks away with a loss on its 25% or so initial equity investment, which it has buy now probably recouped through paying itself dividends (by, no surprise here, issuing more junk debt). And at the tail end of this fairy tale, BX ends up dumping the majority of its tax liabilities on the fools who bought into its IPO (check out the Prospectus for some interesting reading).

Peterson and his firm had exploited this for years, and now that it comes time to finally retire, why not remind Americans how grave of a debt problem we have on our hands and how we will need to cope with higher taxes in order to pay down the deficit.

PE has been the biggest beneficiary of cheap debt and it's quite angering to be reminded of the problems it causes by Blackstone's founders...

Mechel: Putin’s Remarks Create Opportunity for an Attractive Volatility Play

***How can...***

Mechel: Putin’s Remarks Create Opportunity for an Attractive Volatility Play

How call you suggest buying straddles/strangles on a company whose options trade with such ridiculous spreads??? Even if your thesis turns out right, all your paper gains will be erased by terrible entry and exit fills...