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Leveraged Buyouts Running Amok


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Every week we get a story of "unlimited finance" or "unquenchable thirst" in debt securities.

 

Today, Justin LaHart talks about the LBO Boom going on.

 

Easy money raised at the drop of a hat.

 

Excerpts from today's WSJ:

 

Hollow Legs

 

By JUSTIN LAHART

 

Investors have shown a tremendous appetite for newly minted bonds this year. That could feed an already unprecedented leveraged-buyout boom.

 

In August, usually beach month for the bond market, companies issued $58.4 billion in bonds, according to Dealogic, up from $51.5 billion in August 2005. Despite the Labor Day holiday, already more than $13 billion of investment-grade and junk bonds have been issued this month.

 

Typically, bond investors might balk at so much supply, and demand higher yields as compensation for taking it on. But that hasn't been the case.

 

"At some point, you begin to think we're reaching a level where portfolio managers say enough," says Fifth Third Asset Management chief investment officer Mitchell Stapley. "But there seems to be good international demand and portfolio managers continue to buy."

 

The LBO boom is part of the bond boom, because debt helps finance buyouts. More than $200 billion in deals to take companies private have been announced this year, including $22.5 billion for hospital operator HCA and $9.5 billion for Spanish-language television network Univision. These buyouts, largely financed by debt, account for nearly a quarter of the dollar value of U.S. mergers and acquisitions this year, according to Thomson Financial. In 1988 -- the peak year in the 1980s leveraged-buyout boom -- buyouts accounted for 14% of M&A deals.

 

The bonds of firms acquired in leveraged buyouts typically are riskier than other companies'. Bond managers could decide to turn cautious. But it doesn't look like it's going to play out that way. If September's issuance of bonds -- which could approach $80 billion -- gets swallowed by investors without pushing yields much higher, private-equity firms are likely to be emboldened to aim higher, bidding up the values of bigger companies, confident the bond market will help finance their offers.

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jickiss is back!

 

and

 

amock

 

amoron

 

amazing

 

for sure, it is all most annoying, but, as your jickiss has mentioned, over and over, as long as da Zomie bears the yield that it bears,

 

da Boyz are in control.

 

but, with the mills of the gods grinding slowly

but exceedingly fine,

 

who, which one, show us da Man, find the Wise Man, bring in the Buddha,

find the one who can draw back the curtain or pull the strings,

 

and reveal, and name, the Moment when SOMETHING WILL FINALLY HAPPEN.

 

by means of spin, them running, or, (dare we say it????), Front Running the Markets have, in the view of your jickiss,

 

gotten to the point where they believe in themselves totally.

 

what is that word???

 

Hubris?

 

who knows and who cares....it is all about numbers at this juncture.

 

here is a 10 day chart of TRE, presented in the spirit of helping all them that are following along, for, better than most, your jickiss Knows well that to Win the Race, only the picture at da Wire counts, and no money is paid for leading during any particular part of the contest...

 

jickiss!!!!!

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KBX has some bad news, Pooplava in a disagreement with the rest of the board.

 

"Kimber reports that the Board of Directors of the Company has received a letter from legal counsel for Mr. Jim Puplava, a director and significant shareholder of Kimber, advising that Mr. Puplava intends to commence a proxy battle and that he will be moving forward with the objective of replacing the majority of the Board of Directors and current management of Kimber. Management will oppose Mr. Puplava's proxy solicitation."

 

From yahoo.

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KBX has some bad news, Pooplava in a disagreement with the rest of the board.

 

"Kimber reports that the Board of Directors of the Company has received a letter from legal counsel for Mr. Jim Puplava, a director and significant shareholder of Kimber, advising that Mr. Puplava intends to commence a proxy battle and that he will be moving forward with the objective of replacing the majority of the Board of Directors and current management of Kimber. Management will oppose Mr. Puplava's proxy solicitation."

 

From yahoo.

 

 

That's not bad news. Most likely, its going to put the company into play.

 

Puplava will not be able to replace those guys in time, the company will probably be sold.

 

Reason enough to believe that the stock did not move down the last two days.

 

Sharks are circling. Shorts may be in big trouble.

 

Check out the map. GLG, GRS, AEM, MFN all have properties nearby.

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"would you like fries with that, Sir?" :P

 

Shank Diego beanie baby CONstruction CONpany Hallmark CONmunities laid-off half their staff

 

"We used to have amazing food in our break room for free," Carter said. "Starbucks every morning with choice of five different creamers." He also remembers the Greek food and other catered meals the staff would enjoy for lunch meetings. Now, he said, it's pizza once a month and Folgers instant coffee in the break room.

 

no Stankbucks? the Big Man would be pleased -- he knew that joint wasn't right soon as he walked in

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Stoolies

This is the gist of a converation I had recently with that commodities shtunk I talk to evry once in a while--I didn't get all of is remarks but for what its worth here are some of his remarks which I relate rawly unedited --he nade a ton in nickel

 

You'll notice some patronising remarks he makes to me but try to disregard them--Hes made tons of $$$$$ and finds me amusing,one of the reasons he tolerates me..... I think hes wrong in some instances, but who wins when arguing against large sums of $$$ in the vault

 

Beardrech

"The best estimate I can get is a flatteming of GDP, a dropping of gasoline prices till election,then each day after a runup after that of about a nickel a month rise except a nickel cost abou 6.5 cents to produce(joke)

 

and a turning off of ATM charecteristics of home ownership that will flatten GDP close to zero in about 6 months.

 

I dont see a fed runup this go around probably %25 at year end but not sure--dont see banks going busto; I suspect they've palmed off most of the risk to others

 

The metals are in a consolidation phase that will last a few more months--the metals will than start to go up again-we're about a third of the way up in price this time;

 

The market doesn't move linearly but in fits and starts along with retracements of previous advancements and declines

 

Look at the site LME to get multiyear history of prices for metals[london metals exchange]you'll see the charts,they're all milling around, the nickel shorters sold thousands of tons short at around 6 to 8 dollars a pound and had their heads handed to them; and nickel is now about 14 dollars a pound--I haven't researched the metal mining companies yet recently

 

Gold is in the same situation as the base metals --

 

Wait-- Dont act foolishly

 

 

I almost forgot he has looked at thousands of charts TA in his lifetime-so hes both a TA and funnmental guy

General Comments about trading-------------------

 

I spent twenty years reading about this stuff at work--I just put together a lot of anecdotal information into a framework of along with a lot of what I already know about the plants in the various industries and connect the dots

 

I have a long memory about the history of 35 years of the oil and metals along with industrial statistics along with a lot of planr and refinery tours when i was with xxxxxx

 

When new anecdotal data comes in, I put it into a deeply thought out context so that what is noise to you is significant to me about how the big players are thinking and acting;It doesn't come easy

 

I see some of my friends making tons of money and trading looking at the same stuff I do; and they see things I still dont see after 47 years in the market

 

beardrech :ph34r: :ph34r: forty years from now i'll be trading in my harp--shoveling my daily dozen tons of coal

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"Alan Gin, an economist at the Burnham-Moores Center for Real Estate at the University of San Diego, predicted a year-end slowdown for the local San Diego economy due, in part, to a deceleration in employment rates."

 

"During this big boom, a lot of people went into real estate," Gin said. "I think there's likely to be a shakeout there."

 

Ya think? Guess that's why this guy makes the big bucks.

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