Don't you have currency risk?Just an example... GDF.. currently 20% discount to NAV .... in 1998 was trading at 18% discount to NAV.....
So you're paying 80 cents on the dollar at 9% yield. I don't think its such a bad deal. It holds some Russian bonds, and other foreign bonds.
You think Russia that is running record dollar surplusses is about to default ? I don't think so.
Just an example.
I think the bond markets are in panic, and hedgehogs are unwinding leverage. Once this is done, I think they'll start piling that leverage back on in search of yield.
You can buy this stuff on margin, pay 7% for it and get your 9% return.
THE GREAT BEAR MARKET OF 2007....
Started by
NAV
, Jul 28 2007 04:48 AM
12 replies to this topic
#11
traderpaul
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Posted 28 July 2007 - 09:53 AM
"Inflation is taking place now. Prices may not appear to be rising because they are making packaging smaller. "— Rickoshay
#12
wyocowboy
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Posted 28 July 2007 - 10:43 AM
For what it is is worth, bull market corrections are short, sharp, and scarey. If a bear starts under the curre nt conditions, it will mark the first time I have seen such in 27 years.... but there is always a possibility...
Edited by wyocowboy, 28 July 2007 - 10:46 AM.
Good luck is with the man who doesn't include it in his plan.
- Graffitti
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#13
ogm
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Posted 29 July 2007 - 01:21 AM
Don't you have currency risk?
Yes, , there is risk, on the other hand thatere is potential for currency appreciation.
As for why the markets went down.... high rates on junk make LBO's less attractive. We were in an environment where we had a glut of supply of junk debt, and the supply has simply overwhelmed demand. Normal situation. Too many LBO debt, CDO, CLO, CMO... just too much suplyAnd of course higher rates have the risk of slowing economy.
What is happening right now in debt markets is simpy return to normalcy. Rik was grossly mispriced as the spreads on junk went to near historic lows. Now they are getting normal. Risk is being priced more appropriately.
Of course this may have effect on gloal economy, since credit is priced a little higher, but I think underlying strength in growth will overcome this hurdle. Once the market prices it in it can move on.
