by MrBill » Tue 01 Jul 2008, 09:38:20
$this->bbcode_second_pass_quote('Micki', 'M')rBill, from being somewhat pessimistic about the economy you have come out more and more sounding outright negative, with a hint of doomerism. Are you just trying ot fit in or have you come to some dark conclusions on the outcome of these events?
And if the latter is the case, have you noticed this spreading through the industry?
That's a tough one Micki. I really try to stay neutral. But the facts are what they are. I have 195 charts and graphs now archived, and most of them paint a none too rosy picture for the global economy. Inflation has a good head of steam now. And collectively the world's central bankers lack the courage to do what needs to be done to get it back under control.
I do not really feel the need to fit in per se. Everyone is entitled to their opinions. I think it is sad when the emotion of impending doom becomes paralyzing for some posters. There is always something that can be done, and if not then why worry about it?
Many of my posts have not been positive or negative, but have tried to offer a balanced view. Not too US-centric. Not trying to shift the blame for global imbalances elsewhere either. However, I have been somewhat surprised at the speed at which some events have taken place. I am more used to a trading environment where there are plenty of good entry and exit points, so a one way, run away market is not ideal for my own investment style.
Professionally I would say that credit conditions remain very tight, but on the other hand as our core, strategic investments are in oil, gas and power generation that we are actually one of the few areas still experiencing positive growth, and therefore although spreads are higher our cost of capital has remained about the same as interest rates were slashed. And only one investment bank actually cut credit lines, while several others have filled that funding gap.
So the current credit crisis and inflation is creating winners and losers. Perhaps more losers than winners, but it still depends critically where you are positioned in the economy. For us, so far so good. I have noticed, however, that long-term funding is getting harder and more expensive to find, so that creates a refinancing risk should conditions deteriorate further, and there is no reason to expect they will not.
But it is not exactly like we can take our marbles and go home. Up, down or sideways we are always fully invested. We can, however, reduce our leverage and that risk. We are buying more puts and writing more calls (equity collars) as insurance, and borrowing against the price of the puts to free up capital to diversify into other sectors and different securities. And we are working on our second convertible bond issue that is like a forward sale of equity, so again that money can be spread around to reduce our concentration risk. Taken all together that represents several billion dollars worth of portfolio rebalancing undertaken since this time last year. But make no mistake if the global economy tanks we are just as exposed to that as anyone. We all eat from the same rice bowl of global liquidity!
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Prices are rising because available energy is declining faster than the money supply is shrinking.$this->bbcode_second_pass_quote('', '
