Being a ‘markets guy’ is an occupational hazard

October 16, 2022 Leave a comment

I remember watching a program on Bloomberg in October 2021 where Eric Schatzker interviewed Lloyd Blankfein, in which the latter described himself as a “markets guy”.

These type of people know the price of many things in many markets around the world and as Mr Blankfein said, it’s an occupational hazard.

After last Thursday intra-day reversal in the U.S. stockmarket, where the market fell 2.5% and then rose 5% to close, up 2.5%…..Mr Blankfein said this, “This is one of those trading days where if you had the news in advance (above-expected CPI), you REALLY would have lost a lot of money.”

He’s not a prolific quote dropper but he does, they’re good.

Another is, “The best traders are not right more than they are wrong. They are quick adjusters. They are better at getting right when they are wrong.”

And then there is this one, “At the end of the day, it’s not a normal condition to have interest rates at zero.”.

October 16, 2022

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with ,

The great U.S. corporate bond issuance

January 24, 2013 Leave a comment

Singularly, you may not have noticed various U.S. companies either re-finance existing debt or importantly issue new debt, over the past year or so.
Collectively, it is a monumental amount of debt.

Cleverly, these companies have taken advantage of the almost perpetual low yields of the government benchmarks, upon which they can base their spreads against.

Companies such as Oracle, Amazon & Goldman Sachs have issued bonds either secured or unsecured against their equity at historically low yields; which is brilliant financial strategy for these companies.

With interest rates at such low levels, probability and cycles suggest that rates will rise in the coming 6 years or so.

When 10 year benchmark rates are 6% and not 2%, I can’t see a 10 year 2.5% coupon Oracle Corp. bond being redeemed early, meaning bond holders will probably suffer capital losses unless held until maturity. Just imagine holding a bond that yields 2.5% into the latter half of this decade while others are earning twice or three times that amount?

Although, we are seeing a great bond issuance cycle, capital markets will most likely miss out on the next re-financing cycle.

What happens then?

Perhaps, companies will payout maturing debt by selling their own shares, which incidentally, they accumulated in share buy-backs conducted in 2012/2013 using the cheap money that they obtained from the same investors who bought their bonds?

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