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

[TCO]

Re: Double Dip? Short Best Buy!

Originally posted by DanS
Anecdotally and from personal experience, the mid to high end home theater market is in a funk. It's a boutique market to be sure, but I can't help but think that other consumer markets are experiencing similar slowdowns...

Colon: Quite low in comparison to what these companies were able to obtain capital only three or four years ago. If anybody has Ibbottson's, I would be quite interested to see the average cost of capital for '95 through '01, for instance...

What do you mean when you say cost of capitol? long term debt or equity?

[TCO]

Originally posted by DanS
GP: Why let Freud rule your world? Do what I do... DanS it!

I was totally going to. It's just that I've been so tough on you, I figured I needed to Caesar's wife it.

[TCO]

Originally posted by Roland



Yup. In this case, too low - ie, the interest rate (or capital returns in general) did not balance savings with investments. For a while you can paper over that by importing capital and inciting savings through the promise of speculative gains. But in the end, government price fixing does not work.

Could you explain that? The interest rate for corporate debt was set by the financial markets. If funds were not sufficient, rates would go up, no? If the markets judged the debt as worthwhile, than why shouldn't funds come in from overseas? Or the reverse? I mean nobody put a gun to foreign funds managers to make them buy US corp bonds. They obviously didn't think the rates were too low when they bought bonds.

[DanS]

Doesn't Ibbottson's have a short-term and long-term equities and debt series? It would be nice to see all 4.

Re Roland's post, I think he means the equity portion of the cost of capital number. I think the cost for equity capital was quite low in some recent years.

[TCO]

Originally posted by DanS
Doesn't Ibbottson's have a short-term and long-term equities and debt series? It would be nice to see all 4.

Re Roland's post, I think he means the equity portion of the cost of capital number. I think the cost for equity capital was quite low in some recent years.

Not familar with Ibbottson's. Is it like Barra? (beta values)

[DanS]

Yep...

http://www.ibbotson.com/Products/Catalog/pb120.asp

[TCO]

Originally posted by DanS
Yep...

http://www.ibbotson.com/Products/Catalog/pb120.asp

Thanks. So is Ksube what Roland mentions or is it MRP? Or is it just WACC?

[TCO]

Originally posted by GP


Thanks. So is Ksube what Roland mentions or is it MRP? Or is it just WACC?

umm...how do I use html or vB to do sub or superscripts?

[DanS]

GP: Let me do some research on numbers. Google, google.

In the meantime, I thought it was really funny that Enron says liabilities now run $100 billion, an odd $55 billion or so more than originally thought. I think this is the point in the bankruptcy proceedings where you file all of your assets/liabilities.

http://money.cnn.com/2002/04/12/news/enron/index.htm

[TCO]

Originally posted by DanS
GP: Let me do some research on numbers. Google, google.

Which number will you research? If you want term definitions, just look at Valuation by Copeland, et.al. 2nd edition.

(A decent library will have it or can get it for you.)

[TCO]

Originally posted by DanS
In the meantime, I thought it was really funny that Enron says liabilities now run $100 billion, an odd $55 billion or so more than originally thought. I think this is the point in the bankruptcy proceedings where you file all of your assets/liabilities.

(Keeping seperate ideas to seperate posts)

WSJ has been covering this pretty thoroughly. Was an article on this today. I am interested in the exact form of the other obligations.

[pchang]

other obligations

IOUs to hookers and strippers
Markers to gamblers and loan sharks
Liens to drug dealers

you know, the usual stuff

[DanS]

"Which number will you research?"

I remember seeing a cost of equity number that was surprisingly low. I'm trying to research the basis of that number, and how it was derived.

[DanS]

Oh bother. Not much on the web--other than Greenspan saying that there was "extraordinarily low cost of equity capital available to some firms" in late 1999 and 2000--so I'm going to slog through your acronyms at a disadvantage.

Is K_e just how much it would cost to put more stock on the market? If so, then that's a candidate.

If MRP is how much an equity will pay over a bond, then that would seem also to have applied.

I'll let Roland speak for himself, though. Don't want Greenspam putting words in his mouth.

[Roland]

GP:

"Could you explain that? The interest rate for corporate debt was set by the financial markets. If funds were not sufficient, rates would go up, no?"

Or an abundance of funds is created by the fed to bridge the gap. Or/and companies do swaps on extremely low short term rates (wonder how this will show up in results of coming years....). Or/and a flood of cheap money makes its way to the treasury where it is used to buy back the benchmark treasury bonds....

"If the markets judged the debt as worthwhile, than why shouldn't funds come in from overseas?"

The "market" has some serious judgment problems in a boom like the last one. Risk is ignored or shifted on via derivatives. then there's funny accounting - how long did it take the rating agnecies to downgrade enron debt to crap ?

"I mean nobody put a gun to foreign funds managers to make them buy US corp bonds. They obviously didn't think the rates were too low when they bought bonds."

Foreign buyers have been profitting from currency gains. If you are japanese even artificially low US rates are attractive. If you are european and risk-shy, you may look for GSE debt when sovereign issuance is reduced.


You can expand this to equity (esp venture capital), vendor financing, GM's incentives and what not.... no matter how it makes its way ind etail, on the monetary and credit side, the Fed can destort the entire system, esp when it gets boom mechanisms going - like "new economy" delusions.