Thursday, May 03, 2007

Comstock "Awash in Liquidity"

please click on the headline to read the full piece including some frightening charts

klickt bitte auf die überschrift um den ganzen beitrag inklusive der charts zu sehen

...If you believe the bull case that all the excess liquidity will have to flow into the U.S. stock market you would have to become bullish and join the fray. On the other hand, we took a look at the transaction of Cablevision that was announced yesterday. The Dolans are in the process of taking over CVC by taking on $15.5 billion of additional debt on top of the $12 billion already on the books. This will increase the debt to $27.5 billion while the total assets are only $10 billion. Is this what is called excess liquidity? ......
We used to go to Mike Milken’s Annual Los Angeles Conference called "The Predators Ball" where LBOs were the "hot" thing at the time. This was when "junk bonds" and other "payment in kind" gimmicks were used to buy up other companies. The companies that were purchased were restructured and either re-sold or went public again. Subsequently, many of these companies were unable to service their high cost debt and the whole picture turned ugly. This is just before Mike Milken went to jail since he did whatever he could to acquire these companies including "parking securities" with friends so he didn’t have to disclose his interest as he was acquiring the shares. .....


All of these prior "excess liquidity" situations by leveraging companies up with debt had an ugly ending, and we suspect this one will not be an exception. Take a look at the attached charts showing "excess debt" not "excess liquidity". ( headline/überschrift)

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2 Comments:

Anonymous Anonymous said...

The crazy thing about Cablevision and all the debt is that their core franchise is going down the drain. We live in one of the first communities where Verizon is allowed to compete head to head with Cablevision on the triple play. My wife recently participated in a focus group (probably sponsored by Cablevision) and every person at the table had recently switched to Verizon. Why? Every person said they were tired of being ignored by Cablevision and after all these monopoly years it's time to change. Still, Cablevision has not offered customers one incentive to stay. Under all this debt, they'll be gone in 5 years. It's not about Cablevision. It's about the Dolans

6:06 AM  
Blogger jmf said...

thanks for the insight.

sounds like a blowup in the making.

what are buyers of this junk debt thinking?

with so little premium to government bonds....

the bubble is in credit! fueling everything else....

7:34 AM  

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