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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Mark Adams who wrote (3122)	10/17/2001 2:46:21 AM
From: ahhaha	Read Replies (1) \| Respond to of 24758

I assume those making the decisions care what future interest costs are to those who will bear the burden. Who is making decisions? AG? The decisions are made by all of those bearing the burden. Perhaps there are others that you could illustrate? To get people with a good command of capitalism you have to go to China or Russia. Those two are the most capitalist of all nations. Our only hope is that Russia follows our lead and institutes fairness. That will make them uncompetitive. China will never do that and so they will most likely dominate the 21st century. I realize the future interest burden is something difficult to discuss, given we can't 'assume all other things remain the same'. If you think rising interest rates are a burden, then you won't like rain either. Forest fires are constructive for forests. If I were running a business, and I proposed as CFO to buy back long term bonds and substitute notes, I would probably highlight the lower interim interest burden, improved cash flow and so forth. You might be able to con some groupies that way, but if I hold your stock that kind of shell game won't impress me. You can't get something for nothing. If such financial ploys free up cash so that ventures can be engaged which improve the earnings outlook, then I like it, but I also realize the ploy comes with added risk. You can't get something for nothing. The CEO/Board would probably weigh those benefits against the refinance risk going forward. That can't be done because no one has ever been able to anticipate the cost of money. The reason is that its a fully randomized process. You can't trade a bond and you can't expect to realize a capital gain on a bond exceeding its face. Guys doing risk fiddling are simply conning less knowledgeable principles who have been duped into believing they need risk management. When I come across that kind of thing I know I'm closer to a short rather than long candidate. Will the business still need the additional working capital when the notes come due? Will the business have liquidity to redeem the notes at that time? Will market offer finance at favorable terms at a future date? Will the business have grown revenue such that higher refinance costs aren't a cash flow burden? No one will never know whether their calculations make their decisions better than a random call. That isn't the way to manage. You make yourself hostage to many unwarranted and unfounded assumptions. The right way to proceed is to look for opportunity given the resources available. You don't bet on what you don't have and you build on what you got. In other words, what are the risks for making the average duration shorter? You'll never know because extra or unsystematic risk is orders of magnitude outside what is required for meaningful calculation. This is due to FED's interference in the free market in order to create prosperity. The effect of such interference is to increase the economic amplitude so that all regular calculations are knocked into a cocked hat. The guys that continue to compute are doing so because they receive a lot of money for it. They will tell you how important it is up to an offer for a job that exposes the whole rigamarole for the fraud that it is. On the last CHK conf call, CHK? It has a PE of 1.98. You can't find a worse investment. It isn't an investment. It's a bond. The worst thing you can hold is a bond. Not even in true deflation. mgmt responded to an analyst question that they didn't see a need to pay down longer term notes. They preferred the debt in 'stronger hands' rather than dealing with a bank facility. Granted, the debt likely changes hands, but they have no obligation to repay it except under the terms already agreed to, and were comfortable leaving things as they were. Profound. What do you care about these goofballs who are appearing at a job to collect pay? See Gecko's speech. Another company, I forget who, did a derivative swap, exchanging fixed interest for floating rate to the tune of 50 million. I said at the time, that they had made a bet on lower future rates, and had done the swap to improve cash flow in that outcome. Is there a hidden presumption in that simple model of the world I should be aware of? They did a derivative swap and so they added risk which they don't understand. The risk is in the return OF principle. If the swap was structured properly and the clowns know how to manage it, there isn't any interest rate risk up to accelerating rates on the upside. That circumstance provokes unpredictable and irrational behavior. For example, McClendon grabs the dwindling treasury and runs away with Burger's daughter making debt service problematic. Should we adopt a position that any entity is well advised to adjust it's financing any time it's possible to improve cash flow? No. The only way to improve cash flow is to get off one's ass and go get it sold. Everything else is corporate paper shuffling that certainly won't fool me. Won't fool the market either given a PE of 1.98. On the basis that improved cash flow may enable brighter future prospects, greater growth and easier future debt service/retirement? Don't say "cash flow". It means net income plus depreciation. Say earnings or income, because if you have significant depreciation in your mix, you need to change the financial structure radically. Companies with debt always go bankrupt sooner or later. You can't take on as much as 1% debt because it always leads to more for the reasons you've given about improved cash flow. Never own companies with debt. They're losers.