Kodiak (and Aerosappy)-
I read your comment "....we need to find a way to wait it out through the equivalent of 1973-74, bearish magazine covers and scalded investors before we find a market which will reward both fundamental and technical investors.
My guess is that market won't occur before 2nd quarter of 2003 but I could be wrong: it could be later.) and am tossing around mixed feelings about when to step into the breach."
IMO, the pendulum effect is clearly at work. That which was over priced shall become under valued. But, how do we know when it is too under valued?
Aerosappy posted a Fleckenstein article on Charter Comm converts which suggested them as a buy candidate (see message 14761). Imagine that perennial bear actually seeing fundamental value?
Now, I'm of the belief that Bill may have lifted this idea from Goldman Sachs which had put out a detailed research report on these very two securities on June 5th. (I follow CHTR). At that time, however, the 4 3/4s were trading at 65. When Bill mentioned them, three weeks later, they were at 50.
The arguments made sense at both those prices as well as today, when those same bonds were trading at 45-47. Where's the bottom?
Interestingly, Bill's argument ran that if there is any equity value, then the converts are money good and one can earn a lovely 30% annual return. Even if there is no equity value, the bonds could be "good".
Unfortunately, Bill didn't look at "the rest of the story" which goes: if the senior debt (senior to the converts)is trading at 65 cents on the dollar, how can the converts be money good? The converts only comprise 10% of the total debt so, if one is off by 10% in valuing the company, the convert holders lose first.
Of course, they might both be money good.
There are so many dislocations developing that I smell opportunity. Fear is prevalent and everyone is waiting for the the all safe signal called 'capitulation'. God, how tiresome that word has become.
What if there is no capitulation, no gong that goes off to alert the herds that the coast is clear? Maybe just a stealthy bottoming process with rotating pockets of disappointment to keep everyone away from the roulette table while the value crowd slowly builds positions?
So, many questions, so few answers. Since I'm not white knuckled yet, it must still be early. BWTFDIK? |
