GNP, M&A, EBITDA, P/E, NASDAQ, Econo-thread Part 10

[TCO]

Originally posted by Roland

I've only seen speculation about this intervention, it's quite a funny habit since the Holzmann "incident".

Explain funny habit? What was the Holzmann incident?

I'd say if it does not mention the specific tastiness of Stoiber's CSU and a related bavarian bank being the (early) main sponsor of Kirch, it's speculation and rumours.

The story was definitely rumorous. Still seemed to be something in there,

Schröder has no interest in saving the Kirch group as such - only in the sat1-pro7 group, if at all.

What is the sat1-pro7 group?

We have the WSJE here since a couple of weeks, for reasons unknown to me ("it wasn't me" )....

good paper. Read it when I worked in Switzerland.

Yet the real interesting big story is not so much the demise of Germany inc (compared to Nippon inc or America inc, that one was always quite weak), but the changes in capital markets away from the Hausbank system.

Not sure what you mean? I thought the whole point of the article was that GE was becoming more competetive and more stockholder responsive.

Corp bond markets and the pressure on banks to compete means they can no longer support suboptimal capital allocations - which causes some transition problems but will be very benefecial a couple years out.

So the old system still lingers?

[Roland]

"Weak. If you can outguess the market, you can make monye by taking long-term positions that are cheap."

Tell me more about it. The next bubble will certainly come, somewhere.....

"I specifically said corporate bonds."

And I said top-rated, like GE's triple A and the GSEs.

"If the risk assesment is improper, than they are not really top-rated."

They may not be really top, but are really top-RATED, or ?

"Maybe the fund managers in EU land should take responsability."

They should. But the usual rule-of-thumb nr is that foreigners own about 20 % of US corp bonds (including the GSEs, which shouldn't be there), and I don't think europeans have the bulk of that. Oh, and there's enough crappy (esp telco) debt of our own making....

"At what price would you buy it?"

Well on an optimistic assessment, maybe 1.20 EPS is real, and I fail to see a reason why one would pay more than 15x. So the top is ~20 $. On the negative side, GE capital could blow up, which would likely wipe out equity even with a government bailout. Which leaves us with.... don't know, maybe taking a bet between 5-10 $ ?

[TCO]

Originally posted by Roland



Well on an optimistic assessment, maybe 1.20 EPS is real, and I fail to see a reason why one would pay more than 15x. So the top is ~20 $. On the negative side, GE capital could blow up, which would likely wipe out equity even with a government bailout. Which leaves us with.... don't know, maybe taking a bet between 5-10 $ ?

So integrating the different possibilities, what would you say as your valuation?

[Roland]

"Explain funny habit? What was the Holzmann incident?"

funny habit = as soon as a german company is in trouble, anglosaxons start bailout speculation
Holzmann = construction company that got a government guarantee for a bridge loan (~200 million marks?)

"What is the sat1-pro7 group?"

The free TV part of Kirch's empire. It's in the WSJE article - I assume the US version was different ? There are 2 big private TV groups, this one and RTL (with Bertelsmann behind it).

"I thought the whole point of the article was that GE was becoming more competetive and more stockholder responsive."

Stockholder responsive, maybe. But Kirch isn't a publicly traded company, and the stockholders are mainly Kirch, and I think Springer and Mediaset and News corp (though maybe not at the now insolvent holding, would have to dig up a organigram of the whole thing).

The cozy links to politics are another issue.

And the other yet big issue are the banks.

"So the old system still lingers?"

Sure. Takes a while to adjust. This process started with EU capital market deregulation in the 90s and got a push with the euro, but it's far from finished.

As for GE, everyone guesses around as to what GE capital is actually doing. Taking the middle of 0-20, a guess at 10 ?

[DanS]

Here is an interesting FT column advocating yen devaluation. I rather think the larger problem is institutional and more easily correctible than is generally thought the case (although big numbers are involved), but this is an interesting take.

[DanS]

"Liars is a pretty good book, but a lot has changed since then. It is really kinda dull now, even with the recent spectacular fiascos."

That's why everyone started working for Enron.

[TCO]

Originally posted by Roland

funny habit = as soon as a german company is in trouble, anglosaxons start bailout speculation

You like bailout speculation. No?

Stockholder responsive, maybe. But Kirch isn't a publicly traded company, and the stockholders are mainly Kirch, and I think Springer and Mediaset and News corp (though maybe not at the now insolvent holding, would have to dig up a organigram of the whole thing).

I mean the stockholders of the potential rescuers. The article said that they didn't like the cost of being the rescuer.

BTW, thanks for your thoughtful answers on the other points.

[TCO]

Originally posted by DanS
"Liars is a pretty good book, but a lot has changed since then. It is really kinda dull now, even with the recent spectacular fiascos."

That's why everyone started working for Enron.

I was at one time intrigued by Enron and talked to somebody about going there. But wanted to understand the actual value creation mechanisms before going there. (For instance if they were just arbitraging long-term/short term power committments that seems like a business that would have eroding margins. From competition.)


Whole Enron thing makes me sick. Know people who worked for them and who held them up as a model. Were some reasonably bright people...but not kind who think through a topic to nitty gritty. (Too much buzzwordism and not enough economic intution.)

[TCO]

New topic: austrian steel industry. Can you give me or direct me to some info on this topic. I'm intrigued with how it was privatized. How much does government still make dictates/subsidies (for workers). And how they are specialized technically and how capable they are.

[Ming]

Well... another edition of this thread over 500...

Sorry guys, start a new one!