Tuesday, January 20, 2009

Death Watch: Banking System

Or at least according to Nouriel Roubini. The NYU professor and longtime pessimist fired cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 latest shot across cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 bow of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 financial house of cards. His claim: financial losses from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 credit crisis may reach $3.6 trillion, suggesting cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 banking system is "effectively insolvent."
"The problems of Citi, Banc of America and ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs suggest cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 system is bankrupt. In Europe it's cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 same thing." He also thinks that oil will trade between $30 and $40 a barrel throughout 2009.
We love this guy.
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State Street Next Blowup?

State Street (STT) stock tumbled 33% in premarket trading (last at $24/share). The world's largest money manager for institutions said 2009 profit will be little changed from last year after Q4 earnings fell 71%. What is curious is that according to Bloomberg out of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 18 analysts who cover cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 stock, 9 have a buy rating, 9 have a hold and 0 are at sell...yup, good to see sell-side research ahead of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ball on this one too. Dick Bove will have more reasons to vent his anger at Vikram, with his STT price target of $50.

*********UPDATE**********

Stock trading at $18 post open

*********UPDATE 2**********

Closed $14.89 - wow Sphere: Related Content

January 20 Early Headlines

  • The pound is dead, long live cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 pound (Bloomberg)
  • Banc of America expected to cut up to 4,000 in its capital markets group (CNBC)
  • UAW's Ron Gettelfinger "Deadline may be almost unattainable" (Detroit Free Press)
  • Fiat getting 35% of Chrysler, forming global alliance (Bloomberg)
  • Human rights attorney killed in broad daylight in Moscow (Courthousenews)
  • Obama promises to fall flat when faced with "reality" (WSJ)
  • Crude oil for February delivery falls below $33 (Bloomberg)
  • Secret docket lets Feds hide billions in false claims, ACLU says (Courthousenews)
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Monday, January 19, 2009

Putin Can Teach West A Thing Or Two About Capitalism

CEO of Russia in Perpetuity, Vladimir Putin, was faced Monday with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 tough truth of plummeting oil prices. Oil, of course, has been cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 lifeblood of Russia's renaissance in recent years. Instead of running to congress, or in his case cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Duma, and begging for zillions of rubles in bailout funding without acknowledging cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 deplorable state of affairs, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Judo black belt ordered his finance minister to rebase Russia's new budget on a price of $41/barrel, or less than half cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 $95/barrel that was factored in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 existing budget. While this will probably have a dramatic adverse impact on both Russia's GDP and its existing Reserve Fund surplus of $137 billion, Yelena Lebedinskaya, a budget analyst, said "cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re will be borrowings, but cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y won't be large." What, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is a way out of a crisis that does not involve printing $5 trillion in new money?

Well, if all else fails, Russia can always default like in 1997. But at least Karl Marx is happy... with what is going on in D.C. and London.
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Breaking News: NYT Bailed Out (For Now); It's Official

Just out: The New York Times Company Enters into Agreement with Banco Inbursa and Inmobiliaria Carso for $250 Million in Senior Unsecured Notes.

Holy Jeebus: 14.053% interest!!! And of course Goldman Sachs.

NEW YORK--(BUSINESS WIRE)--Jan. 19, 2009--The New York Times Company today announced that it had entered into a private financing agreement with Banco Inbursa, S. A., Institucion de Banca Multiple, Grupo Financiero Inbursa ("Banco Inbursa") and Inmobiliaria Carso for an aggregate amount of $250 million ($125 million each) in senior unsecured notes due 2015 with detachable warrants. The notes will rank equally and ratably on a senior unsecured basis with all senior unsecured obligations of The New York Times Company.

"This agreement provides us with increased financial flexibility to continue to execute on our long-term strategy," said Janet L. Robinson, president and CEO. "The proceeds from this transaction will be used to refinance existing debt, including amounts currently borrowed under a revolving credit facility that matures in May 2009. We continue to explore ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r financing initiatives and are focused on reducing our total debt through cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cash we generate from our businesses and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 decisive steps we have taken to reduce costs, lower capital spending, decrease our dividend and rebalance our portfolio of assets."

"We are very pleased to expand our strong relationship with The New York Times Company," said Arturo Elias, director of Inmobiliaria Carso. "We believe that with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 strength of The New York Times brand, its national and international reach, its potential for digital expansion and most of all, its world-class news and information, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Company will continue to be a leader in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 media industry."

The notes have a coupon of 14.053 percent, of which cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Company may elect to pay 3 percent in kind. The notes are callable beginning three years from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 issue date at 105 percent of par, with subsequent call prices declining ratably to par.

Banco Inbursa and Inmobiliaria Carso also received detachable warrants for an aggregate amount of 15.9 million Class A shares (50 percent each), at a strike price of $6.3572. The warrants expire in January 2015.

Mr. Carlos Slim Helu and members of his family are cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 main shareholders of Grupo Financiero Inbursa, S.A B. de C.V., which is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 parent company of Banco Inbursa, and are cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 owners of Inmobiliaria Carso, which currently holds 6.9 percent of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Times Company's Class A shares.

SunTrust Robinson Humphrey, Inc. was cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 sole placement agent for this transaction, and Goldman Sachs advised cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Company.

Hear that Scott Galloway, THERE CAN BE ONLY ONE!!!!! No clue where cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 hell NYT CDS trades on this news.
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Buffett Fearful When Ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs are Fearful

In what some might consider a minor case of about-face and an even more minor case of hypocrisy, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Oracle of Omaha is quoted by Reuters as saying cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 stimulus plan under consideration by cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. government is not enough to reverse cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 economic decline, and that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 $700 billion TARP has been implemented in a "haphazard and capricious way" and "without proper planning." Mmmk, so if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 government, which is throwing every taxpayer's kitchen sink at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 house of cards that is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 global financial system is not enough, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n what is? And what happened to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 NYT (Death Watch, CDS: 956) clarion call of "Buy American. I am." Granted, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 underlying logic behind cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 motivation to buy cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n was "be fearful when ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs are greedy, and be greedy when ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs are fearful." Well that's a nice soundbite, and a good mantra for one's Vinayasa yoga class, but what should investors do now besides scratch cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir heads.

We know Warren can not be wrong... He simply can not, ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rwise all those official and unofficial biographers will have to join NY's investment bankers in finding a regular job (cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re are 4,291 hits in Amazon.com to a "Warren Buffett" query). So we merely attribute this temporary bout of insanity to his distress from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 news earlier about Becky Quick's wedding.
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British Pound: His Name is Robert Paulson

*POUND WEAKENS ON SPECULATION U.K. CREDIT LOSSES WILL SPREAD
*POUND FALLS TO SIX-YEAR LOW OF $1.4295 AGAINST DOLLAR Sphere: Related Content

Real-Estate Values in Bastion of Hedgefundery Plummet

Yes, we all know median home prices are down, nobody is buying or selling anything, 30 year mortgages are cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cheapest cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y have ever been but nobody can get one, yada yada... However, this is all for California, Nevada and Detroit, right? Wrong.





In Prudential's most recent real estate analysis of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 market in Ponziville aka Greenwich, CT, we can see some very shocking numbers: cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is a roughly 40% drop in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 total dollar value of houses sold in 2008 vs. 2007. More (or less) surprisingly cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 transaction dollar value of houses over $5 million has dropped by almost 50%. Curiously, and probably for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 first time in a long while, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re was a sub $400,000 house sold in 2008. In 2005 you couldn't buy a rusty outhouse by cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 railroad underpass for that amount. Sphere: Related Content

Rick Bookstabber Implicated in Dr. Seuss Parody

Bridgewater quant guru and author of A Demon of Our Own Design, Rick Bookstabber, has found an unexpected role in this curious take on Dr. Seuss' The Lorax. Enjoy, courtesy of The Nervous Breakdown.

Sample:

The following week my newest sensation
was an exchange-traded product based on
inflation.

I was tireless in my creative formation
of new instruments that needed translation.
My epic was collateralized debt obligation

though I also showed off my inventive chops
with a little something I called credit default swaps.

I meant no harm. I most truly did not.
But I had to grow bigger. So bigger I got.
I securitized mortgages and credit card debt.
I securitized insurance. I securitized Tibet.

**********UPDATE**********

We have learned that Bookstabber (that name is almost as cool as that of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Artradis Barracuda fund we profiled earlier) is no longer at Bridgewater. Sphere: Related Content

Cerberus Blaming Employees for Horrible Investments

Cerberus is allegedly laying off 10% of its worldwide staff of 275 professionals. According to a spokesman "Any action we take will, of course, be consistent with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 best interests of our investors." I wonder if those interests were consulted when cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 PE firm acquired Chrysler and/or cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 51% stake of GMAC. Ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r PE firms performing actions consistent with investors' best interests include American Capital, Carlyle, Investcorp and 3i. Sphere: Related Content

Dick Bove Angry, Takes It Out on Citi Again

Ladenburg analyst Dick Bove (who understandably underestimated cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 stupidity of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Treasury and on Sept. 12 stated his belief that "Banc of America will win cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 auction for Lehman Brocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs.") has just whacked his target price for Citi from $14 to $6, and is projecting a 2009 loss of ($1.45), a whole buck lower than consensus estimates. Vik Pandit couldn't care less, as he is currently putting cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 finishing touches on his resume, and spinning his Old Lane experience in a favorable light. Sphere: Related Content

Death Watch: Greece, and What Its Default Could Mean

The biggest threat to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. Obama rally and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 miracle recovery proposed by Democrats in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 $825 billion bail out package may possibly reside about 6,000 miles away in Greece. On Wednesday, Greece became cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 first "Western" European country, and EU member, to have its ratings cut by S&P in recent years (link to S&P assessment here). Greece's debt is a staggering 98% of 2009 GDP (cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. with its estimated $10 trillion of debt is at about 70% of GDP). Thomas Mayer, chief European economist at Deustche said "The downgrade of Greece is a wake-up call to everyone that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is a price to pay for taking on big levels of debt." Wow Thomas, no kidding. So what does a potential default by Greece mean for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 European Union? Short answer - nobody knows. The FT tries to present some scenarios of what a bail out of Greece would look like, none of which are attractive, with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 worst case summarized as "you could conceive of a scenario under which cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 bail-out had to be so large that it would bring down cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 entire system. This could cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n provide cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 non-defaulters with an economic incentive to leave."

Could a Greece default have a domino effect of dismantling cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 European Union? Time will tell. In cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 meantime as S&P is going down cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 list of potential downgrades, here are some standouts in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 debt/GDP category: Austria: 65%; Belgium: 85%; Germany: 65%; Italy 102%; Japan 111%; Portugal: 61% and UK: 53%.
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Attention Steve Rattner: Please Check This Out

As cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 clock ticks on labor and creditor negotiations for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Detroit 3 (it seems like only yesterday that people called cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365m cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Big 3) ahead of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 March 31 deadline for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 thumbs up/down decision, it might be prudent to look at this. All over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 world millions of brand new unsold cars are piling up in vacant lots. Perhaps it is not a bad idea for GM to again reasses its 2009 vehicle sales target of 10.5 million. Sphere: Related Content

Sentinel Management Trader Was Paid With Lap Dances To "Bring Firm Down"

In an update to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 lawsuit filed by trustee Fred Grede against bankrupt cash management firm Sentinel Management Group, head trader Charles Mosley has been accused of accepting bribes including lap dances, expensive dinners and 2006 Orange Bowl tickets from Cohen & Co. and Keefe Bruyette & Woods (cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 original case description can be found here). According to claims, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 firms "compromised, coopted and duped" Mosley into buying $280 million in structured debt. Ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r parties implicated include Goldman Sachs and Citadel, who have been accused of helping Sentinel insiders make fraudulent transfers on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 eve of its bankruptcy. Sentinel, which had managed $1.6 billion of short-term investments for clients filed for bankruptcy in August 2007. The suit claims "Sentinel representations to customers about cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 assignment or allocation of specific securities to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir segments were complete fabrications."

Making this relevant for today's news, if anyone has any pictures of 76 year old Art Nadel frolicking in Mons Venus, please bring cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365m to our attention. Sphere: Related Content

RBS Stock Down Over 60% in Europe Trading

Probably not that surprising after posting cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "biggest ever loss reported by a U.K. company" of $41 billion. Biggest shareholder, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 United Kingdom Government with 22.8 billion shares, can not be happy with an $8 billion + loss in 6 hours of trading. Paulson, with 142 million shares short, is very happy.

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Gasparino-Kneale Boxing Match Extravaganza on Hold Over Becky News

In a move that is sure to shatter Warren Buffett's heart, Becky Quick has recently gotten hitched... to none ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than her boss it seems. Page 6 reports that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 anchor of Squawk Box quietly married CNBC executive producer Matcá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365w Quayle, who is apparently a big Christian, and a divorcee with two kids to boot.

The news will likely incite her legions of male fans, who follow her every snide smirk on CNBC, as well as her personally on her annual pilgrimage to Omaha every May, to find creative ways of breaking up that marriage too. We, on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r hand, wish cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 newlywed couple all cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 best. Sphere: Related Content

Sunday, January 18, 2009

Death Watch: NYT About to Get George Romero Treatment

I guess cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 expression "throwing good money after bad" hasn't quite made it to Tijuana yet. NYT reports that Carlos Slim is about to invest $250 million of 10 year 10% convertible preferred stock and that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 New York Times board is meeting on Monday to formalize his investment. Surprisingly Slim is "not expected to get any representation on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company’s board or any shares with special voting rights like those of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Sulzberger family, which controls cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company." As we speculated, this is odd, seeing he has already lost over $70 million on his initial NYT investment. But let cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 man dream. In cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 meantime, mufkateer Galloway should be happy cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Mexican has bought him some more time to prepare for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 final duel with Connor MacLeod. Sphere: Related Content

Death Watch: Is Southwest (LUV) in Much More Trouble Than Perceived? Few More Words on Contango

We like Southwest - cheap tickets, drunk passengers on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Vegas flights, hot passengers on ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs, sweet equity ticker... Yet something is fishy in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 city of Dallas... The company which was a perennial LBO candidate back in late 2006 and early 2007, somehow managed to escape unscacá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365d through cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "oil at $140" phase when most ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r airlines' shares had fallen to penny-stock levels. This can be attributed to its fortuitous hedging program that was started a decade ago, when its legacy competitors were trying to deal with outsized pension costs and massive debtloads (and most ended up in bankruptcy).

Now with oil crashing and contango getting steeper, it is curious how companies that hedged for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 inverse are faring. In fact, one of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 reasons cited by analysts for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 deep contango is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 unwind of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 costless collars that companies such as LUV and JetBlue have had to do in past months. Southwest partially confirms this in its December 23 8-K filing where it notes it has drastically reduced its future hedging program by selling it zero-cost collars. The net market impact of this unwind is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 forced selling of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 near contracts (February 2009) and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 purchase of far contracts. As cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 traded volume of near maturities is usually lower than that of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 outer, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 effect is a pronounced steepening of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 near curve as seen below. If anyone is a NYMEX trader and can confirm or deny this we would love your feedback.



So what is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 actual economic impact on heretofore beneficiaries of extensive hedging? Let's take cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 example of Southwest.

As cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company was a heavy user of "zero-cost collars and fixed-priced swaps", it was benefiting while oil was priced higher than cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 average strike price on its derivatives which had been $75/barrel for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 2009-2012 period. In its July 24 Q2 results announcement and market update, LUV noted cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "Fair Market Value of its hedges was $4.3 billion." At cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 time WTI was $125/barrel. It has now fallen to $36. Intuitively, FMV must have dropped dramatically, if not gone negative. As we are not specialists in fudging whatever FASB rule is responsible for determining FMV of Derivative contracts we will ignore this for now and instead focus on its most direct corporate proxy - cash. Here are cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 facts:

  • At September 30 cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company noted it had $2.4 billion in cash equivalents and $2.5 billion in Fair Value of fuel derivatives, already a big drop from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 $4.7 billion in cash and $4.3 billion in derivatives 2 months prior (WTI was at $100 on Sept. 30). Also cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company decided to access $400 million of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 $600 million available under its revolver in October, so cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 net cash balance would have been roughly $3.0 billion around that time, excluding cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 FV of fuel derivatives.

  • On a December 23 update cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cash balance had dropped to $1.3 billion, net of $250 million in cash collateral calls, a huge drop from 2 months prior. One could say cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 FMV at this point is negative: over $4 billion in "value" lost from June 30, and $3.5 billion in cash equivalents burned in less than six months for a company which is ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rwise supposed to be free cash flow positive!

  • On cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 same update, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company announces it has essentially offset/sold its derivatives and only hedges 10% of its 2009-2013 fuel costs.



  • Allegedly, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "modification of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 hedge portfolio has significantly reduced cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Company's current exposure to cash collateral requirements."

  • Nonecá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365less, at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 same time LUV is feverishly raising cash: cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 day before cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Dec. 23 update it sells $400 million 10.5% Notes due 12/2011 which are secured by 12 737-400 aircraft; On Dec. 23 it announces it is pursuing a $350 million sale-leaseback of 10 737-700 planes at an interest rate of roughly 9%, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 leaseback is completed on Jan 8. Also curiously, an amendment (8.01.b) to its fuel hedge agreement on Dec. 23 stipulates that until January 2010, LUV has to continue to post cash collateral if "cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 obligation is below $300 million or over $700", but if it is inbetween cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company has agreed to "pledge 20 737-700s in lieu of cash"... quite odd, yet we wouldn't be surprised if this is exactly what happens.

  • If cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company's claim that its hedges are truly no longer a drain of cash, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n its cash balance on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 January 22 earnings call should be about $2 billion ($1.3 billion + $750 million new proceeds), all else equal.

  • Furcá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rmore, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company has a cash collateral rating trigger: if its credit rating (Baa1/BBB+ currently) drops below investment grade, it would have to post cash collateral with many more counterparties. This would imply a three notch downgrade. While S&P, in a recent omnibus report claims it is not likely to downgrade LUV soon, a significant downside surprise on January 22, or additional debt-capital raises could easily change analyst Betsy Snyder's opinion.

  • The continuing contango steepening is indicative that someone keeps on unwinding costless collars: is it JetBlue, Delta, or is Southwest continuing to deleverage its bad future exposure all cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 while having to post cash collateral?

  • Aside from just meeting its ongoing cash needs, Southwest is faced with a cliff of future contractual obligations. Its current fleet of 520 737s (425 owned, 95 leased as of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 10-K filing) is due for modernization, with 200 aircraft approaching retirement age at 16.7 avg. years (mostly 737 -300s and -500s). Its replacement plan consists of firm contracts and options to purchase up to 246 737-700s from Boeing; assuming it scraps its options, it still is on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 hook to buy 108 airplanes over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 next 5 years at a cost of $3.2 billion.

  • And what happens if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company manages to unhedge successfully only to see a dramatic increase in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cost of crude? Goldman Sachs research currently expects LUV's 2009 fuel expense to be $2.1 billion based on 1,459 mm mainline gallons at $1.47/gallon or $62/barrel. If hypocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365tically oil were to go up to $90, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 impact on LUV's EBIT and EBITDA, left naked without any hedges, would be -$1 billion (in ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r words each $1 change in oil cost is about $35MM in EBIT). And if oil is, again hypocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365tically, $90/barrel, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re goes cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company's projected $1 billion in 2009 EBIT.

We do not claim to have discovered anything dramatic here, just doing a little homework and getting to a few conclusions, which may be right or wrong. If this is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 case at Southwest, we are curious how JetBlue, and ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r hedging airlines must be faring. One last word: Southwest CDS trades miles tighter than anyone else in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 space. Legacy airlines and JBLU CDS trade roughly around 2000 bps (or whatever cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 points up equivalent is). LUV is at 385bps. If we are in fact correct and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 situation at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company is deteriorating rapidly, this CDS will likely begin its one-way trek wider soon, maybe as early as cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 January 22 conference call. Additionally cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 stock is trading at a racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r aggressive 13.3x P/E its consensus 2009 EPS (JBLU is at 10x, both DAL and UAUA are around 5x). This also seems like a racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r precarious level.


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Wouldn't Be Fun Without Anocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r Ponzi

James Ossie of Alpharetta, Georgia's CRE Capital is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 latest Madoff wannabe. Yawn, just $25 million. Nothing to see here. The guy isn't even on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 run. Allegedly cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company was marketed as "distinctive, high-end private investment company offering a progressive and low-risk, high-yield opportunities (sic) to investors." Sphere: Related Content

Blue Light Special: Hedge Fund Secondary Market Update

On January 18 hedgebay.com announced cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 following $10 million blocks for sale:
- SAC Multi Strategy
- Montpellier Resources
- ZLP Offshore

Additionally, an investor with some foresight is bailing out of $6.65 million in Millennium. Anocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r major selling block recently has been a $20 million piece of Elliott International that a seller has been dangling for a while.

On cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r side, Ore Hill must have done something right: cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is $35 million in bid side interest.

For people new to this whole hedge fund thing, and why archaeologists may be looking for its bones soon enough, read cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 full scoop here, courtesy of Louise Story of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 New York Times (Deathwatch CDS at 962bps) Sphere: Related Content