Global Bailouts Will Lead to Global Inflation: How to Play It Written By: David Neubert 2008-10-16 14:59:43 Photo: tao_zhyn, Creative Commons, Flickr
All the money used by central banks around the world to rescue the financial system is causing an increase in government liabilities.
I'm willing to make a speculative bet that he will be able to keep Thornburg Mortgage solvent but at a very dear costs to equity holders, but just in case I'd rather buy the preferred stock (TMA_PRC - $4.59, TMA_PRD - $4.55). I'm assuming preferred would still have some value in a liquidation. If there is no liquidation and the company is saved, it could return shooting distance ($19.00ish) of the par value of $25.
Thinking About The Fed: It's Late Thursday Night and I Can't Sleep Written By: Eben Esterhuizen 2007-08-31 00:41:02 Someone once joked that the best cure for insomnia is to get a lot of sleep, but somehow I don't find that funny at the moment. If you're a homeowner in pain, you might also be struggling to sleep. You might be dreaming of a parallel world where Fed chairman Ben Bernanke saves the day, but you're more likely to wake up with a nasty housing market hangover when Bernanke speaks on the housing market tomorrow morning at 10am ET.
Why is Bear Stearns Trading Above Deal Price? Written By: David Neubert 2008-03-18 11:05:52 I've been getting the inside scoop from some hedgefund traders (who always request to remain anonymous). One told me that the reason Bear Stearns (BSC - $7.90) is trading so far above the deal price with JP Morgan (JPM - $41.00) is that bond holders who NEED the deal to go through are buying millions in equity to save their billions in debt. The will eat the difference between where they buy the equity and $2.00 in order to protect much higher numbers in debt. Also, the equity acts as a nice hedge. If the deal does not go through, Bear Stearns equity will go up a lot and the bonds will go down.
Lesson in hedge fund thinking: Equity up? The bank is being sold cheap at the expense of equity holders to protect bondholders. No deal means the equity can trade up speculation that another buyer with more time to analyze the company will pay up. Bonds Down? If JP Morgan walks away from its government subsidized guarantee, bonds fall.
Year End Selling Trade: Picking Up Closed End Funds at Big Discounts Written By: David Neubert 2007-12-16 18:29:46 Photo:ldysw357, Creative Commons, Flickr This phenomenum of closed end funds getting cheap into year end and rebounding is another type of January effect that is well known but not without risk. It is well known, and yet it continues to exist. Part of the reason may be that the lack of liquidity keeps any hedge fund or bank trading desk from taking advantage of it. I know that there are funds that engage in closed end fund trading strategies, but there always seems to be room at year end for this one to work.
I've been buying fixed income closed end funds at a cheap, but by no means unprecedented, 13-15% discount to NAV (Net Asset Value) this year end. The cheapness usually disappears with the changing of my calendar to a new year and that's when I take profits. I will exit this trade based only on the cheapness of the funds to NAV. I risk the bond market falling (interest rates going up), or the bond portfolios underlying the Closed End Funds collapsing for some other reason, like credit concerns or the liquidity crisis we have seen this past quarter. And while they carry greater than normal bond because some funds are leveraged, they also carry a yields from 4-7% that is nicely at or above the Fed Fund's rate.
So what did I buy this week? Here is the list of four municipal bond funds and one taxable income fund:
