Hi, Peter - Thanks for your response.
"Illiquidity is not a problem for ILECs (except Qwest), each of which has a cellular play...The recent reauction of NextWave spectrum was hardly as expensive as UK and German auctions."
True, but the auction of spectrum before that was pretty pricey. The NextWave re-auction came "after the rush", so to speak.
I don't have the posts at hand, but I recall, in spring of this year, doing some serious research on what was happening in capital markets.
The reason for the research was the appearance of a glaring inconsistency: it was common knowledge that Greenspan had reversed the practice of "double dipping" (which had resulted in a sudden and drastic disappearance of liquidity) and had reverted to pumping liquidity back into the economy. However, in spite of that sustained effort to restore liquidity, by summer, it was clearly not getting to the bottom of the food chain, so to speak.
I can't say I was successful in finding out what was happening: the best explanation I was able to discover was from Ed Yardeni's market commentaries, in which he discussed the shifts that capital financing had undergone, in recent years. In May, I re-stated >smile< some of his comments, here:
Message 15859805
" He said that in 1984, he coined the term "Bond Vigilantes" to describe the growing power of fixed income investors and traders over the economy. In recent years, he said, they've lost some of their clout because the U.S. Treasury is paying off the federal debt. Also, inflation has been relatively tame, and so have they. Venture capitalists became the new power elite in the late 1990s leading the Nasdaq to record highs.
He says that now the bond crowd is back: they are tightening credit conditions, while the Fed is easing. The Treasury bond yield is up over 50 basis points since March, which is boosting mortgage rates. The spread between A-rated corporate and 10-year Treasury yields has widened dramatically from around 150 basis points at the end of 1999 to more than 250 basis points recently. The high-yield and commercial paper markets are essentially shutdown for all but prime borrowers."
Peter, I do recall commercial paper being floated in this period. I can't remember who: I think, one or two of the larger ILECs. But it was high-yield stuff and there certainly wasn't much of it going around.
In a more general sense, I think it would be safe to describe capital markets, in the last 12-18 months, as "constrained" at the very least, especially in the telecomms sector.
Recent events will likely alter that scenario, especially for those companies working at the edge (capacity being plentiful).
Best regards,
Jim |
