Charlie Bottle

12 Comments

    • Richard X. Bove on Lehman: An Assault on Reason [view article]
      Dear Prescient,

      Thank so much for your comments. Indeed the goal fo the article was not to analyse Lehman's solvency and much less the end of the world (I am of the view that financials hit bottom 7/15), the objectve was simply to point out the flawed argument (I would lamost qualify it as a non-sequitor) in the article.

      You cannot separate the good businesses from the bad businesses realize the value fo the good ones and leave your creditors hanging on to the bad ones.

      There may even be a buyer out there for Lehman, but to say that there will be hostile take over battle with two or more contenders under current conditions is non sensical IMO.       Aug 25 05:18 PM
    • Richard X. Bove on Lehman: An Assault on Reason [view article]
      Double AA, thank you for your comment. No doubt there are rules that need to be followed regarding insider trasanction, there is a time "window" for such sales, disclosure requiremets, etc. I did not mean he should buy shares in the next couple of days - he has had two months since last quarter's earnings to do it. Completelly agree with you that if he wanted to make a statement by buying shares he could do it. Aug 25 02:45 PM
    • Salesforce.com: It's All About the Guidance [view article]
      Zach, entirelly agree with your analisys, and great timing on putting out - you were right on target.

      CRM is one of the most overvalued stocks out there, it is not only priced for perfection in its only line of business (CRM) but also priced for world domination. It is very likelly to disappoint in any environment and almost sure to do that in a recessive environment like the present one. Still a lot of downside on the stock IMO.

      Disclosure: short CRM       Aug 24 11:47 PM
    • Sears Faces Risk If Economy Doesn't Improve [view article]
      SHLD is facing headwinds and I think it is sfae to say that Lampert's strategy is not working. The Company has a leadership problem. A key difference between Eddie Lampert is that Warren stays out of his management's hair (except in extraordinairy circumstances) while Lampert does not seem to know what he does not know.

      However, the company is generating positive cashflow (the last quarter may be just an anomaly becuse of seasonal inventory build up), the compnay enjoys appropriate liquidity. The call for risk of bankruptcy is entirelly premature and not based on facts.       Aug 09 10:04 AM
    • Annaly Capital Management: Epitome of Low Risk, High Reward [view article]
      10% increase in the value strikes me as too agressive; if they had gone down by that much NLY would have been obliterated.

      Basic bond math tells you that change in value of portfolio approximates change in yield times duration of the portfolio.

      It seems that you are overestimating the upside and underestimating the downside, given that (i) the entire agrument for the upside rests on this and you do not have enough information (and perhaps knowledge) to ascertain it with any precision, and (ii) you incorrectly stated that the government has provided an explicit guarantee on the agency debt.

      The artcile subtracts from the sum of human knowledge, I suggest you do the right thing and ask to remove it as itis technically incorrect on key aspects.       Aug 06 09:46 AM
    • Annaly Capital Management: Epitome of Low Risk, High Reward [view article]
      JAZ, what about my question on the relationship between the yield and the mark to market of the assets? What are your assumptions on the duration or the portfolio? Aug 04 05:05 PM
    • Annaly Capital Management: Epitome of Low Risk, High Reward [view article]
      JAZ, With regards to the relationship on the change in yield and markup of the assets, that would depend on the net duration of of the NLY portfolio taking into account swaps etc. are you assuming that duration is 1 year? I would think it would be substancially longer. Aug 04 10:49 AM
    • Annaly Capital Management: Epitome of Low Risk, High Reward [view article]
      Thank you for the analisys. I agree NLY prsents a pretty unique arbitrage opportunitty. However I do not believe it is technically correct to say that the goverment has provided an explicit guarantee. Its support for the GSEs consists on an increase of the credit line from the treasury, access to the fed discount window and authorization by the tresury to buy shares of the agencies to shore up its balance sheet. Also it would be helpful if the author explain the assumptions behind the logic for the the logic for the 10% Markup, I presume it means that the yield on agency MBS falls by 10% (say from 5.5% to 5%, i.e. from a 150 bps spread over threasuries to 100 bps)? Aug 01 07:41 PM
    • A Critical Market Juncture (Again) [view article]
      The introduction of a clearinghouse in the "middle" of all CDS contracts means that each contract would have as counterparty the clearing house (just like in a derivatives exchange) rather than another participant.

      For example, a contract where LEH sold JPM CDS on a name, becomes effectivelly two transactions: LEH sells to the clearing house; the clearing house sells to JPM. This way JPM is not exposed to LEH counterparty risk (or vice-versa).

      By creating this hub structure, this sytem effectivelly diversifies counterparty riks and allows the system to better absorb the default of any individual counterparty. The problem with the existing over the counter structure is that it coexists with concentrations of exposure to a limitied number of counterparties by any given participant which creates the potential risk for a domino effect of counterparty defaults. This is why JPM had little choice but to buy bear strearns, and why the Fed is very focused on this.       Jul 01 12:51 AM
    • Spanish PPI Continues to Pressure Consumer Prices [view article]
      Edward, thank you for this artcile, tremedous value add.

      Clearly Spain is facing some of the same issues as the UA, namelly a slowing economy after the bursting of a real eate bubble and mounting inflationary costs. It will be very interesting to see how the spanish economy fares after a cycle of extraordinary growth.       Jun 30 12:35 AM
    • Treasury Bonds: The Short of the Century [view article]
      I stand factually corrected on both cases and also stand 100% behind the logic and resonablensess of the conclusions of the article:

      - Tips are pegged to CPI-U which includes food and gas. Please note that this is in no way central to the arguments in the article. I stand by the main argument that inflation is not accuratelly measured for the several reason pointed, and that the focus on core inflation (which is systematically tauted byt the FED and in the media) MAY (I repeat MAY) have some impact on investors perception of inflation and therefore the required return on their bond investments. This just one a several arguments provided and not the main one by any means.

      - In the example provided where I mention duration it should read maturity. Maturity is a VERY rough approximation of the sensitivity of a bullet bond price to interest rates (it has the advantage of being very intuitive which is good for an article of this nature); in longer maturity bonds it does differs samewhat from duration.

      Duration (McCaulay Duration) as you point out needs to take into account not just the principal repayment but interest coupon; it is the sum of the cash flows discounted by the yield multiplied by the time cashflow divided by the price of the bond (i.e a PV wighted average maturity). In this case, assuming a 4% coupon and that the bond trades at par it would imply a duration of about 8.4 years, and therefore an estimated change in the price of the bond of 25.2% rather than 30%.

      Off course Mcauley duration is also an approximation, to be more precise one should use modified duration and to be even more precise one should use convexity, so you can decide how precise you would like to be. The numbers were used to give an idea of the order of magnitude and this in no way changes the merits of the argument, I believe.

      Thank you for adding precison to the discussion.

      With regards to the second comment (by "djzvue") on the use of leverage, I just wanted to clarify that he must have misread, on the contrary I did NOT recommend the use of leverage and did in fact highlight the increased risk of levergage in such a trade.

      Jun 26 01:23 AM
    • BofA CEO Lewis the Next to Fall? [view article]
      I agree, very suprised that they seem poised to close the transaction, which I think is imminent now; I was expecting BAC to keep post-ponning the close and drop it at an opportune moment so as to minimize the likelly resulting disruption in the market.

      I have not reviewed the financials but I supect that this is not in the best interests of BAC shareholders; possibly a desperate attempt by Lewis to save face and post-pone loosing his job?       Jun 24 12:35 PM
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»

Trading Center