Andrew's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/98341/comments http://seekingalpha.com/article/170144-sprint-s-upcoming-phone-lineup-it-has-to-do-better-than-that?source=feed#comment-738699 738699 Sat, 31 Oct 2009 18:01:01 -0400 http://seekingalpha.com/article/71766-citigroup-hoping-for-a-thaw?source=feed#comment-148040 148040
freakdog, I don't think the LBO debt or new IOU's from the PE's would qualify at the Fed discount window, at least I hope not.]]> Wed, 09 Apr 2008 23:58:39 -0400
freakdog, I don't think the LBO debt or new IOU's from the PE's would qualify at the Fed discount window, at least I hope not.]]> http://seekingalpha.com/article/71757-could-citi-s-deal-signal-a-turnaround?source=feed#comment-148032 148032
The flip side of the argument is that the PE's aren't obligated to do anything they don't want. They have now willingly taken on direct risk to these loans, where as the previous LBO loans were tied to the buyout with no recourse to the PE's.

To me, it seems like C paid 15-20% of face value (including loss of future interest) to upgrade from junk bond to BB on the $12B debt. Is it a smart deal for C?? We will have to see what the actual terms and which bonds? If PE's are just cherry picking off the top, then C will really be exposed with the LBO debt remaining in their portfolio.


]]> Wed, 09 Apr 2008 23:40:29 -0400
The flip side of the argument is that the PE's aren't obligated to do anything they don't want. They have now willingly taken on direct risk to these loans, where as the previous LBO loans were tied to the buyout with no recourse to the PE's.

To me, it seems like C paid 15-20% of face value (including loss of future interest) to upgrade from junk bond to BB on the $12B debt. Is it a smart deal for C?? We will have to see what the actual terms and which bonds? If PE's are just cherry picking off the top, then C will really be exposed with the LBO debt remaining in their portfolio.


]]> http://seekingalpha.com/article/71512-schering-plough-the-vytorin-zetia-backstory?source=feed#comment-148028 148028
With regard to "the last resort" comment from ACC, are the panelist refering to the cost of Vytorin vs. other statins or treatments? They compared the plaque removal of Vytorin vs. generic statin. But, what about Lipitor or Crestor????

The alternative would be that the ACC panelist were actually challenging the current NCEP dislipidemia guidelines....lower LDL = better.

This controversy illustrates a couple of things to me:

- medicine is still some art and not all science.
- With pharmas' contracting p/e and increasing stock volatility, maybe they should be owned by private shareholder who would have longer term visions. There seem to be a conflict of duty between providing the best drugs and managing a stock for the short term.
]]> Wed, 09 Apr 2008 23:12:49 -0400
With regard to "the last resort" comment from ACC, are the panelist refering to the cost of Vytorin vs. other statins or treatments? They compared the plaque removal of Vytorin vs. generic statin. But, what about Lipitor or Crestor????

The alternative would be that the ACC panelist were actually challenging the current NCEP dislipidemia guidelines....lower LDL = better.

This controversy illustrates a couple of things to me:

- medicine is still some art and not all science.
- With pharmas' contracting p/e and increasing stock volatility, maybe they should be owned by private shareholder who would have longer term visions. There seem to be a conflict of duty between providing the best drugs and managing a stock for the short term.
]]> http://seekingalpha.com/article/70877-haven-t-we-heard-this-market-song-before?source=feed#comment-146140 146140
BSC: ARE you kidding on increasing valuation from here!!!
--JPM has already started absorbing the BSC mgmt team and letting go some employees. BTW, the BSC people that JPM is hiring get more JPM stocks to cover for the loss in value of their BSC stocks (not to mention a job when Wall Street is chopping everywhere).
-- Who do you think bought Jimmy Cayne's shares??? JPM owns over 42% of the outstanding stocks now. In the case of any future litigation, you don't need to hold the stock to qualify because the event has already happened.

-- Most of BSC's institutional clients, namely the hedge funds, have left. It's sad in a way.....BSC's coveted hedge fund clients turning against their own primary broker by pulling their money while shorting BSC's stock. May not be collusion, but definitely a lesson for other investment banks.

As for the argument about BSC's book value, my analogy is this:

A guy who makes $100,000/yr buys a $2,000,000 with $20,000 down payment (alarms bell should be ringing). The house is fantastic and in a great neighborhood. The guy loses his job, and misses payment on his house for a few months. The house may still be worth $2,000,000, but how much of it belongs to the guy? The answer is less than zero, because even if he sells his house for $2,000,000, he doesn't have enough equity to pay for the selling costs. His best option is to take the $1,000 cash from the mortgage holder and vacate the home without trashing it.

The cruel joke here is the eery similarity between Wall Street and Main Street with regard of debt leverage.....one of the basic lessons in Econ 101.


]]> Sun, 06 Apr 2008 21:49:47 -0400
BSC: ARE you kidding on increasing valuation from here!!!
--JPM has already started absorbing the BSC mgmt team and letting go some employees. BTW, the BSC people that JPM is hiring get more JPM stocks to cover for the loss in value of their BSC stocks (not to mention a job when Wall Street is chopping everywhere).
-- Who do you think bought Jimmy Cayne's shares??? JPM owns over 42% of the outstanding stocks now. In the case of any future litigation, you don't need to hold the stock to qualify because the event has already happened.

-- Most of BSC's institutional clients, namely the hedge funds, have left. It's sad in a way.....BSC's coveted hedge fund clients turning against their own primary broker by pulling their money while shorting BSC's stock. May not be collusion, but definitely a lesson for other investment banks.

As for the argument about BSC's book value, my analogy is this:

A guy who makes $100,000/yr buys a $2,000,000 with $20,000 down payment (alarms bell should be ringing). The house is fantastic and in a great neighborhood. The guy loses his job, and misses payment on his house for a few months. The house may still be worth $2,000,000, but how much of it belongs to the guy? The answer is less than zero, because even if he sells his house for $2,000,000, he doesn't have enough equity to pay for the selling costs. His best option is to take the $1,000 cash from the mortgage holder and vacate the home without trashing it.

The cruel joke here is the eery similarity between Wall Street and Main Street with regard of debt leverage.....one of the basic lessons in Econ 101.


]]> http://seekingalpha.com/article/70903-money-center-banks-the-greater-fool?source=feed#comment-137018 137018
At least two other things would worry me if I was a bank (money center and shadow):

- as Mr. Hill stated, all the buyers have left the market. U.S. debt security market has suffered significant and wide spread damage. Even the most cash rich investors such as Chinese and Middle Eastern oil countries will not buy these securities, and they will take much lower stakes in future secuities created (i.e. a shift in total demand). In turn this will hurt the ability of banks to generate new credit, which will then hinder the recovery of the real estate market. Remember, most people buy based on net payments not overall price. Next to the broad exportation of these securities, the lead-paint toys that China has exported to the U.S. pales in comparison.

- Threat of inflation: most of these 04-07 vintage securities are at pretty low interest because there was very little risk premium built in (most were sold as AAA securities). As the reality of how much inflation U.S. is facing due to commodity inflation and weakening $ due to stretched balance sheets (both government and consumers) hits the market, the entire yield curve is going to shift upwards. This is going to shrink the nominal value of the 04-07 vintaged securities, which is a double whammy from write-down of their intrinsic values.

I guess this is why analysts are saying C and MER need to raise more capital. ]]> Sat, 05 Apr 2008 14:34:07 -0400
At least two other things would worry me if I was a bank (money center and shadow):

- as Mr. Hill stated, all the buyers have left the market. U.S. debt security market has suffered significant and wide spread damage. Even the most cash rich investors such as Chinese and Middle Eastern oil countries will not buy these securities, and they will take much lower stakes in future secuities created (i.e. a shift in total demand). In turn this will hurt the ability of banks to generate new credit, which will then hinder the recovery of the real estate market. Remember, most people buy based on net payments not overall price. Next to the broad exportation of these securities, the lead-paint toys that China has exported to the U.S. pales in comparison.

- Threat of inflation: most of these 04-07 vintage securities are at pretty low interest because there was very little risk premium built in (most were sold as AAA securities). As the reality of how much inflation U.S. is facing due to commodity inflation and weakening $ due to stretched balance sheets (both government and consumers) hits the market, the entire yield curve is going to shift upwards. This is going to shrink the nominal value of the 04-07 vintaged securities, which is a double whammy from write-down of their intrinsic values.

I guess this is why analysts are saying C and MER need to raise more capital. ]]> http://seekingalpha.com/article/71015-merck-schering-plough-confessions-of-a-vytorin-patient?source=feed#comment-136853 136853
Just for reference, can anyone give treatment cost for a branded monotherapy statin, such as Lipitor? (actual question)]]> Fri, 04 Apr 2008 23:55:59 -0400
Just for reference, can anyone give treatment cost for a branded monotherapy statin, such as Lipitor? (actual question)]]> http://seekingalpha.com/article/69308-thornburg-mortgage-must-sell-its-soul-to-stay-afloat?source=feed#comment-129888 129888
The question: is TMA a sinking ship even with new capital?]]> Fri, 21 Mar 2008 14:55:16 -0400
The question: is TMA a sinking ship even with new capital?]]> http://seekingalpha.com/article/69308-thornburg-mortgage-must-sell-its-soul-to-stay-afloat?source=feed#comment-129726 129726
TMA i believe will survive as an entity, but investing in it is kind of like living along the Gulf Coast.....don't live in the basement apartment.

Sunyata, I see your point now.]]> Fri, 21 Mar 2008 08:59:54 -0400
TMA i believe will survive as an entity, but investing in it is kind of like living along the Gulf Coast.....don't live in the basement apartment.

Sunyata, I see your point now.]]> http://seekingalpha.com/article/69308-thornburg-mortgage-must-sell-its-soul-to-stay-afloat?source=feed#comment-129566 129566
TMA's earnings available to common share holders will be limited for years (if at all) because:
- They have to pay 12% for the $1B, which will eat into the mortgages they are buying/generating.
- They will no longer be able to leverage 20x in the post credit bubble world, which again eats into the future growth potential of mortgage reits.

The only way I see current shareholders make out is if the value of current assets increase in value. With the housing market still going down, i don't see this happening for at least a year.

full disclosure: I am long tma preferred.
]]> Thu, 20 Mar 2008 19:53:35 -0400
TMA's earnings available to common share holders will be limited for years (if at all) because:
- They have to pay 12% for the $1B, which will eat into the mortgages they are buying/generating.
- They will no longer be able to leverage 20x in the post credit bubble world, which again eats into the future growth potential of mortgage reits.

The only way I see current shareholders make out is if the value of current assets increase in value. With the housing market still going down, i don't see this happening for at least a year.

full disclosure: I am long tma preferred.
]]> http://seekingalpha.com/article/67618-so-much-for-that-mortgage-reit-bull-market?source=feed#comment-123908 123908
The only thing that will help mortgage reit unit prices now is government intervention.....Fed start buying mortgages.

Beyond the short term panic, these reits will face a tough recovery over the next few years because of a credit contraction in US financial system.

Despite of recent criticism of the Fed, I believe it is doing the right thing for long term economic growth by deflating the credit bubble. I believe they will: let the weakest players die; severely wound the average, and scar the strongest (at least enough to keep them in check for another 10 yrs). However, I do believe we are getting close to the end of the lesson at this point. Afterall, this is an election year. I believe NLY will be a survivor, although I'm not sure if it will break $20 any time soon. I'm going to be content in collecting my 5%ish yield. As for TMA, we'll find out over the next couple of weeks whether they are one of the survivors in the financial jungle or merely one of the weak.

Hey, here's a hot tip......try getting into commodities, oil and gold.....it's really working well.......no way will they go down from here because they are finite resources. ]]> Sat, 08 Mar 2008 09:14:39 -0500
The only thing that will help mortgage reit unit prices now is government intervention.....Fed start buying mortgages.

Beyond the short term panic, these reits will face a tough recovery over the next few years because of a credit contraction in US financial system.

Despite of recent criticism of the Fed, I believe it is doing the right thing for long term economic growth by deflating the credit bubble. I believe they will: let the weakest players die; severely wound the average, and scar the strongest (at least enough to keep them in check for another 10 yrs). However, I do believe we are getting close to the end of the lesson at this point. Afterall, this is an election year. I believe NLY will be a survivor, although I'm not sure if it will break $20 any time soon. I'm going to be content in collecting my 5%ish yield. As for TMA, we'll find out over the next couple of weeks whether they are one of the survivors in the financial jungle or merely one of the weak.

Hey, here's a hot tip......try getting into commodities, oil and gold.....it's really working well.......no way will they go down from here because they are finite resources. ]]> http://seekingalpha.com/article/57144-what-do-brittany-spears-snow-white-and-mbia-have-in-common?source=feed#comment-105576 105576
1. Global economic growth will mean greater participation in all financial markets including debt instruments. Greater number of participants will mean greater volatility, which increases demand for insurance hedging.

2. With recent central banks' moves to increase the backing on global credit liquidity, sub-prime and derivative defaults will slow down in absolute terms or at least be pushed back. If so, this makes your analysis overly aggressive.

3. Moody's confirmation of Ambac's AAA rating with stable outlook will ease potential customers' concerns (at least for Ambac).

Although the providers of monoline insurance may change and the industry may consolidate from current problems, the monoline business will only grow with the global economy.

]]> Sun, 16 Dec 2007 13:28:30 -0500
1. Global economic growth will mean greater participation in all financial markets including debt instruments. Greater number of participants will mean greater volatility, which increases demand for insurance hedging.

2. With recent central banks' moves to increase the backing on global credit liquidity, sub-prime and derivative defaults will slow down in absolute terms or at least be pushed back. If so, this makes your analysis overly aggressive.

3. Moody's confirmation of Ambac's AAA rating with stable outlook will ease potential customers' concerns (at least for Ambac).

Although the providers of monoline insurance may change and the industry may consolidate from current problems, the monoline business will only grow with the global economy.

]]> http://seekingalpha.com/article/47042-bluestar-whats-in-a-name-probably-a-hint?source=feed#comment-96618 96618
Maybe a more substantive piece with Bluestar's business profile would be more useful.
]]> Sat, 22 Sep 2007 10:30:36 -0400
Maybe a more substantive piece with Bluestar's business profile would be more useful.
]]> http://seekingalpha.com/article/44138-during-stormy-days-for-apple-remember-the-fundamentals?source=feed#comment-93465 93465
The biggest risk to Apple's growth is maintaining talent and keeping them motivated. The execution of Apple's product development and marketing strategies have been unparalleled for the past 5 years, and the task only becomes more challenging as competition catches on.

Having said that, Apple's pricing power has become as strong as it's brand. Their margins are 2 to 3 times greater than competitors.

Apple stocks can rebound to all time highs by Christmas if:
- 1mm iphone sales in US by end of q3 (ahead of aapl schedule, but lower than crazy expectations)
-initiate sales in europe with good reception and buzz
-USD continues to be weak against Euro ($1.35 usd/Euro or higher)
-no global financial crisis.

The ramp up of iphone sales is critical to Apples future, as ipod sales are surely going to start declining by next year at the latest. While amortizing iphone sales over 2 yrs will be beneficial in leveling out earnings in the longer term, it may mean a slowdown in revenue growth next year.]]> Sat, 11 Aug 2007 18:13:58 -0400
The biggest risk to Apple's growth is maintaining talent and keeping them motivated. The execution of Apple's product development and marketing strategies have been unparalleled for the past 5 years, and the task only becomes more challenging as competition catches on.

Having said that, Apple's pricing power has become as strong as it's brand. Their margins are 2 to 3 times greater than competitors.

Apple stocks can rebound to all time highs by Christmas if:
- 1mm iphone sales in US by end of q3 (ahead of aapl schedule, but lower than crazy expectations)
-initiate sales in europe with good reception and buzz
-USD continues to be weak against Euro ($1.35 usd/Euro or higher)
-no global financial crisis.

The ramp up of iphone sales is critical to Apples future, as ipod sales are surely going to start declining by next year at the latest. While amortizing iphone sales over 2 yrs will be beneficial in leveling out earnings in the longer term, it may mean a slowdown in revenue growth next year.]]> http://seekingalpha.com/article/44189-market-observations-on-a-difficult-day?source=feed#comment-93455 93455 I believe hedge funds aren't the only ones selling. I'm noticing sell off in widely held, dividend paying stocks as well (i.e. big pharma, energy). I believe income funds and insurance companies are getting ready to buy debt on the cheap.

Anyway, this can be a good opportunity for invstors with strong cash position.

Financial institions and hedge funds that want to qualify for liquidity bail outs by the Fed should make all mgmt (director level on up) give back bonuses from the past 3 years. The thought that "professionals" have made their money and left investors to hold the bag is revolting.]]> Sat, 11 Aug 2007 12:23:21 -0400 I believe hedge funds aren't the only ones selling. I'm noticing sell off in widely held, dividend paying stocks as well (i.e. big pharma, energy). I believe income funds and insurance companies are getting ready to buy debt on the cheap.

Anyway, this can be a good opportunity for invstors with strong cash position.

Financial institions and hedge funds that want to qualify for liquidity bail outs by the Fed should make all mgmt (director level on up) give back bonuses from the past 3 years. The thought that "professionals" have made their money and left investors to hold the bag is revolting.]]> http://seekingalpha.com/article/43677-blackstone-is-a-dog?source=feed#comment-93074 93074
You focus should be on how BX has grown their assets mgmt at 34%+ per year for the past 10 years, without a single down year (even through '97 global liquidity crises and bursting of tech bubble). This rate of growth is 60% faster than peers (20%+ per year growth by avg private equity).

good luck.

BTW, there's no "t" in Schwarzman.]]> Tue, 07 Aug 2007 13:47:21 -0400
You focus should be on how BX has grown their assets mgmt at 34%+ per year for the past 10 years, without a single down year (even through '97 global liquidity crises and bursting of tech bubble). This rate of growth is 60% faster than peers (20%+ per year growth by avg private equity).

good luck.

BTW, there's no "t" in Schwarzman.]]> http://seekingalpha.com/article/43261-private-equity-returns-you-may-do-better-with-treasuries?source=feed#comment-92840 92840
Recent credit market events will lead to credit tightening, which in turn will hurt many people from individual real estate investors to private equity groups. But, the raised bar will also provide long term opportunities for those that are truely good at their business. Globalization will create more opportunities for knowledge arbitrage....from opening coffee shops to acquisitions.

Private equity gets a lot of bad press, but it creates a source of competition for "strategic" investors (i.e. companies already in the business), which is good for individuals investors and consumers.

For example, Daimler paid $35 billion in 1998 to "merge" with Chrysler. They are now selling Chrysler for $7.4 Billion. I would submit that the individual investors of Daimler got the worst of this one, since senior management are still collecting paychecks and bonuses. Remeber Tyco, MCI? How strategic were those acquisitions?

Another example that is closer to home. Remember the last round of consolidation of oil majors at the turn of the century (always wanted to say that)? How has that worked out for us as consumers? Now most of us are scared to divest from energy stocks because it's our only hedge against inflation.

To come full circle with some irony.... I submit that much of the recent volatility from hedge fund trading and private equity run up came from the petro dollars that left our wallets to the oil exporting nations'.

The bottom line is that capital markets are a double edged sword. Our mantra should not be good vs. evil, but rather "caveat emptor".

I'm not involved with hedge funds or private equity. I have recently started accumulating Blacktone Group.]]> Fri, 03 Aug 2007 23:18:11 -0400
Recent credit market events will lead to credit tightening, which in turn will hurt many people from individual real estate investors to private equity groups. But, the raised bar will also provide long term opportunities for those that are truely good at their business. Globalization will create more opportunities for knowledge arbitrage....from opening coffee shops to acquisitions.

Private equity gets a lot of bad press, but it creates a source of competition for "strategic" investors (i.e. companies already in the business), which is good for individuals investors and consumers.

For example, Daimler paid $35 billion in 1998 to "merge" with Chrysler. They are now selling Chrysler for $7.4 Billion. I would submit that the individual investors of Daimler got the worst of this one, since senior management are still collecting paychecks and bonuses. Remeber Tyco, MCI? How strategic were those acquisitions?

Another example that is closer to home. Remember the last round of consolidation of oil majors at the turn of the century (always wanted to say that)? How has that worked out for us as consumers? Now most of us are scared to divest from energy stocks because it's our only hedge against inflation.

To come full circle with some irony.... I submit that much of the recent volatility from hedge fund trading and private equity run up came from the petro dollars that left our wallets to the oil exporting nations'.

The bottom line is that capital markets are a double edged sword. Our mantra should not be good vs. evil, but rather "caveat emptor".

I'm not involved with hedge funds or private equity. I have recently started accumulating Blacktone Group.]]> http://seekingalpha.com/article/43237-market-manipulation-bites-apple?source=feed#comment-92824 92824 They can really amplify market sentiments by injecting a lot of money in a very short time. They'll even leverage the money with options.

I've long suspected hedge funds don't want to publish client lists because average investors would be upset at where the money is coming from...... think about this comment the next time you filling up at the gas station. More specifically, where do you think the majority of the petro$ has gone? (my estimate is oil exporting nations net $300-350 MM per DAY)

Having said all that, I'm looking forward to next Tuesday's conference for an AAPL product update.]]> Fri, 03 Aug 2007 17:22:36 -0400 They can really amplify market sentiments by injecting a lot of money in a very short time. They'll even leverage the money with options.

I've long suspected hedge funds don't want to publish client lists because average investors would be upset at where the money is coming from...... think about this comment the next time you filling up at the gas station. More specifically, where do you think the majority of the petro$ has gone? (my estimate is oil exporting nations net $300-350 MM per DAY)

Having said all that, I'm looking forward to next Tuesday's conference for an AAPL product update.]]> http://seekingalpha.com/article/43040-a-look-at-apple-since-the-iphone-launch?source=feed#comment-92561 92561
The biggest unsung hero in Apple's growth engine is the decline in the dollar against Euro. European sales is now responsible for over 30% of aapl's revenue, and the growth rate is much stronger than US.

Apple's iphone sales for the coming year is heavily dependent on introduction of a lower priced phone and on time introduction into the European market. Over the next two years, Apple will have to resolve technical issues and put out a CDMA phone.

The increasing sales of iphone franchise has to grow very quickly, in order to replace the flattening (and soon declining) iPod sales.

One can't expect rewards without risk. Then again, who would of thought anyone would pay $79 (shuffle) for what is basically a $5 flash memory stick with some basic software...or $1200 for a basic iBook laptop, when a comparable pc version goes for $450.]]> Tue, 31 Jul 2007 19:29:24 -0400
The biggest unsung hero in Apple's growth engine is the decline in the dollar against Euro. European sales is now responsible for over 30% of aapl's revenue, and the growth rate is much stronger than US.

Apple's iphone sales for the coming year is heavily dependent on introduction of a lower priced phone and on time introduction into the European market. Over the next two years, Apple will have to resolve technical issues and put out a CDMA phone.

The increasing sales of iphone franchise has to grow very quickly, in order to replace the flattening (and soon declining) iPod sales.

One can't expect rewards without risk. Then again, who would of thought anyone would pay $79 (shuffle) for what is basically a $5 flash memory stick with some basic software...or $1200 for a basic iBook laptop, when a comparable pc version goes for $450.]]> http://seekingalpha.com/article/42866-private-equity-s-boom-now-busting?source=feed#comment-92533 92533
The failue in junk bonds isn't usually due to the underlying assets or cash flow, but rather people buying or shorting the debt with extreme leverage. Subsequently, they can not bear the volatility as market reprices risk.

The debt liquidity and pricing issue are all muddled into a single big issue, but it should be reviewed objectively as supply and demand. No doubt, the hedge funds who borrowed yen to fund CDO or CMO puchases on 90% margin can't feel good right now. But, the underlying economy is still strong. One big difference between no and the 80's is that the entire World economy is growing (faster than U.S. in many cases). For example, the Middle Eastern OPEC nations are generating over $200 MM per day (net net basis) from petroleum. That money has to go somewhere; they're not going to bury it into the sand. Bottom line, is the risk is more spread out this time around. Again, this doesn't mean there won't be a shake out, but the quality hedge funds and private equities will only get stronger from a tougher barrier to entry.

An example...
Blackstone spun off Celanese toward the end of last year. They Bought CE in fall of 2004 $3.9 B
Blackstone borrowed around $2B. They netted around $1B from the IPO and subsequent sales (roughly 50% of investment in 2 years). The cost of borrowing was not the biggest variable in the earnings in this case. Each additional 1% in debt interest rate would have increased cost of funding by $20MM/year.

The drivers of this deal were:
- proper valuation of commodity businesses
-strategically moving the equity from Europe to U.S., where there is higher P/E
- Kept and incented existing management team to make operating improvements.
-currency mangement ($ has depreciated 5-7% in the 2 years since acquisition). In essence, it was acquired at a discount.]]> Tue, 31 Jul 2007 11:45:40 -0400
The failue in junk bonds isn't usually due to the underlying assets or cash flow, but rather people buying or shorting the debt with extreme leverage. Subsequently, they can not bear the volatility as market reprices risk.

The debt liquidity and pricing issue are all muddled into a single big issue, but it should be reviewed objectively as supply and demand. No doubt, the hedge funds who borrowed yen to fund CDO or CMO puchases on 90% margin can't feel good right now. But, the underlying economy is still strong. One big difference between no and the 80's is that the entire World economy is growing (faster than U.S. in many cases). For example, the Middle Eastern OPEC nations are generating over $200 MM per day (net net basis) from petroleum. That money has to go somewhere; they're not going to bury it into the sand. Bottom line, is the risk is more spread out this time around. Again, this doesn't mean there won't be a shake out, but the quality hedge funds and private equities will only get stronger from a tougher barrier to entry.

An example...
Blackstone spun off Celanese toward the end of last year. They Bought CE in fall of 2004 $3.9 B
Blackstone borrowed around $2B. They netted around $1B from the IPO and subsequent sales (roughly 50% of investment in 2 years). The cost of borrowing was not the biggest variable in the earnings in this case. Each additional 1% in debt interest rate would have increased cost of funding by $20MM/year.

The drivers of this deal were:
- proper valuation of commodity businesses
-strategically moving the equity from Europe to U.S., where there is higher P/E
- Kept and incented existing management team to make operating improvements.
-currency mangement ($ has depreciated 5-7% in the 2 years since acquisition). In essence, it was acquired at a discount.]]> http://seekingalpha.com/article/41980-blackstone-i-m-lukewarm-on-the-offering?source=feed#comment-92432 92432
When compared to other PE's, such as KKR and Apolllo, recent history shows BX to be more strategic and better execution. Take a look at Celanese and EOP. Compare the margins of these deals vs. what KKR, Cerbrus, Apollo have done in the past couple of yaears.

The $26B Hilton deal should not be compared to TXU or Chrysler. Hilton is one of the premier brands in the Western Hemisphere. But, the best value for Hilton acquisition lies in China, where there were only 5 as of end of 2006. The economy of China has grown to the point where business travel will start growing astronomically. How to fund the $26b buyout?? Oh yeah, the Chinese government also bought a small stake in BX.

No doubt, headwinds are strong at this point in time with "subprime" fears and taxation issues, but please don't use a dull knife to cut your meat.]]> Sun, 29 Jul 2007 19:42:36 -0400
When compared to other PE's, such as KKR and Apolllo, recent history shows BX to be more strategic and better execution. Take a look at Celanese and EOP. Compare the margins of these deals vs. what KKR, Cerbrus, Apollo have done in the past couple of yaears.

The $26B Hilton deal should not be compared to TXU or Chrysler. Hilton is one of the premier brands in the Western Hemisphere. But, the best value for Hilton acquisition lies in China, where there were only 5 as of end of 2006. The economy of China has grown to the point where business travel will start growing astronomically. How to fund the $26b buyout?? Oh yeah, the Chinese government also bought a small stake in BX.

No doubt, headwinds are strong at this point in time with "subprime" fears and taxation issues, but please don't use a dull knife to cut your meat.]]> http://seekingalpha.com/article/42520-forget-the-iphone-apple-investors-should-be-focused-on-spectacular-ipod-growth?source=feed#comment-92429 92429
Biggest driver of revenue growth has been the pent up demand in Europe, with cheaper $.

The biggest difference with Iphone and other premium products including Ipods is that people will buy only 1....regardless how much money an idividual has. This reduces the demand, especially at $500 to $600 price range. I believe Apple will sell 10mm Iphone by end of next year, but at a lower unit price.
As a reference, there are 11.3mm US households that make over $125K per year (2.3 avg person/household). there are 18.1mm US households that make over $100K per year (avg. 2.5 person/household).

Apples future success will depend on:
growth in the number of higher income households (globalization)
meaningful new product introductions
the ability to update existing products quickly enough to reduce replacement cycle (why do you think they don't have replaceable batteries in ipods and iphones).]]> Sun, 29 Jul 2007 19:19:47 -0400
Biggest driver of revenue growth has been the pent up demand in Europe, with cheaper $.

The biggest difference with Iphone and other premium products including Ipods is that people will buy only 1....regardless how much money an idividual has. This reduces the demand, especially at $500 to $600 price range. I believe Apple will sell 10mm Iphone by end of next year, but at a lower unit price.
As a reference, there are 11.3mm US households that make over $125K per year (2.3 avg person/household). there are 18.1mm US households that make over $100K per year (avg. 2.5 person/household).

Apples future success will depend on:
growth in the number of higher income households (globalization)
meaningful new product introductions
the ability to update existing products quickly enough to reduce replacement cycle (why do you think they don't have replaceable batteries in ipods and iphones).]]>