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Cora1

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  • Plan Orange: Killing the Mortgage Crisis Quickly [View article]
    The same sort of rationale (let the market run its course) got us into the trouble. The only problem with letting markets run its course is that markets tend to trend far beyond what could be considered fair value (or equilibrium); and that financial markets change the state of the real economy (and therefore what equilibrium actually is). Put differently: having any sort of social responsibility should actually motivate us to come up with rationale solutions that limit the cost to society. Letting the markets run its course is best acceptable to those caring little about society and much about ones short position.



    On Feb 03 09:04 AM kelm wrote:

    > Ultimately we have got to have bankruptcies, equity holders, debt
    > holders etc. lose their money - that is what wipes the slate clean.
    > This crisis will drag on far longer than it needs to if we don't
    > recognize that. The government needs to do a controlled demolition
    > for insolvent institutions. printing money to add to the federal
    > debt is not a solution. What faith can anyone have in a currency
    > when we simply print $5 trillion dollars to cover up our errors?
    Feb 3 05:15 PM | Likes Like |Link to Comment
  • Plan Orange: Killing the Mortgage Crisis Quickly [View article]
    I wonder how many people mix price (of a home or a stock) and value (which depends on use and assumption of future cash flows). Prices are in decline for a number of reasons, but prices are set by marginal buying and selling. In my view, the cheaper solution to the problem is one that adresses these marginal prices rather than the stock of outstanding homes. I am European and not familiar with the US housing market. From this fragile background, I would tend to suggest the government buying homes in foreclosure at a reasonable price, taking this marginal supply off the market for several years (rent out to former orwner with option to buy-back), refinance the property at lower rates and pay the bank mortgage with a discount (that will most likely be lower than the provivsioned value). Effect 1) Price pressure on housing market eases, 2) Risk on mortgage pool of banks reduced, 3) Reduced risk in prime and subprime assets results in positive price effects and profits at banks 4) equity capital recovers and so does ability to lend. 5) as prices of mortgage related assets recover due to lower risk, private investors will return to the market and take assets off the banks balance sheet. Greatful for feetback. (CORA-Capital@o2online...
    Feb 3 07:40 AM | Likes Like |Link to Comment
  • Company Death Watch: Harley-Davidson [View article]
    They stopped buying back in Q3!


    On Jan 25 07:49 PM RADO wrote:

    > I have to say, HOG management surprised me on Friday... I thought
    > they were more rational. It's hard to understand why they continued
    > to waste cash on share bay-backs and dividends and at the same time
    > straggle to refinance debt. It just doesn't compute... buying shares
    > at $39 using hard-borrowed, short-term loans - what was their investment
    > thesis, I wonder? I hate it when managers start playing "Warren Buffet"
    > instead of managing their operations. Avoiding dividend cut is another
    > irrational decision...seems like "image" for management is more important
    > than cash.
    >
    > On the other hand, I am less pessimistic for the long term. 80% of
    > receivables are prime; 30-day delinquencies are 6.29% for 2008, about
    > the same as in 2007 (6.15%). Defaults are 2.3%. If management is
    > not hiding anything, this is much higher quality of receivables than
    > market average. Also, ABSs have short maturities and a prepayment
    > option; too bad management did not bother to disclose how much of
    > the portfolio will convert into cash this way in 2009.
    >
    > I also see as positive development the replacement of the HDFS manager.
    > The guy was simply unprofessional - any more or less experienced
    > banker would know that financing 5-7 year loans with 180-days notes
    > is insanity. I guess he had no clue about some basic banking concepts
    > like portfolio duration and gap risk. Maybe the new CFO heard of
    > them? We'll see soon.
    >
    > My judgment is - there will be no bankruptcy (company core economics
    > is strong, and so it's long-term position), but unless the management
    > gets realistic and rational ASAP, we'll see a lot of shareholder
    > equity go down the toilet, along with the share price.
    Jan 27 10:39 AM | 1 Like Like |Link to Comment
  • Company Death Watch: Harley-Davidson [View article]
    Interesting contribution, Ryan. Your disclosure: Short HOG; Your intention: Closing short in HOG?
    Jan 26 02:57 AM | 1 Like Like |Link to Comment
  • Harley Will Sputter Into 2009 [View article]
    Company is undeniably facing a perfect storm, but stock appears heavily shorted, negative news is out, downward revisions of unrealistically high analyst earnings expectations done by Monday/Tuesday; with company guiding Q1 deliveries up and Q2-Q4 implicitely down some 19% I tend to see more risk being short this stock than long, especially as the upcoming stimulus package may contain some positive news with respect to consumer financing (catalyst for buying/short-covering)... In terms of valuation: the stock is cheap (2009 EPS should come in between USD1 and 1,5 pre-charges. Comparing HOG to GM (1st comment above) is not valid with respect to balance sheet, margins and thus ability to cope with the current challenges.

    Disclosure: bought at $10.3 on Friday
    Jan 25 07:44 AM | 1 Like Like |Link to Comment
  • Bailout Bill Passes; What Happens Now? [View article]
    Please forgive a foreigner a few typos, but ...

    1) On money supply and inflation: assume subprime assets were bought against payment in treasuries: the money supply would not rise!
    2) If under the package, banks lose risk assets for treasuries, they not only get rid of illiquid assets, but also get collateral for interbank lending. Leverage (in risk assets) and liquidity improve.
    3) Furthermore, capitalisation of banks will improve due to price recovery in risky assets. Everyone is focusing on the USD700bn. However, if these 700bn in hypothetical demand create something like a psychological price floor for what is currently sold at fire sale prices, the package is suitable to trigger the market entry of private equity investors in larger scale. As prices of risk assets recover, so will the capitalisation of banks.
    4) This package will hence improve bank balance sheets from the asset and the capital side, and provide liquidity / collateral to banks. Money markets are likely to calm.
    5) As far a lending to main street is concerned, a lot is gained by securing the functioning of credit markets going forward. Nothing wrong with your analysis of the American desease and that more saving is required. We hopefully agree that the complete collapse of the banking system is not the preferred way to get there.
    6) As concerns market to market and trust: Market to market is fine when prices reflect value. You are not however not honestly arguing that investors have higher trust into US banks for as long as there is need for two bailouts per week when accounting on market to market and fire sale prices? I guess we agree there is need to return to market to market when markets have calmed.
    7) How short are some of you? And what is your attitude towards social responsibility?
    Oct 4 09:47 AM | Likes Like |Link to Comment
  • UBS: Can It Get Any Worse? [View article]
    Congratulations. You did everythring wright in the past. Do not forget to close your position: A rising share price and falling volatility will hurt :o)
    Jul 10 12:05 PM | Likes Like |Link to Comment
  • GE: More Bad News to Come? [View article]
    It is apparent that some things are not going very well at GE at the moment. However, are things as bad as the share price suggests? On a Euro basis (rather than in USD), the stock trades currently lower than in 2002, and we are talking a company with a major share in turnover and assets outside the US, and with some US assets that deserve a far higher multiple than what is paid for the group as a whole.
    Jun 17 08:56 AM | Likes Like |Link to Comment
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