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Who Cares Where You Are In The Capital Structure If The Fed Doesn’t Allow Bankruptcies?
Like many irritable observers, I lost my sense of humor with the Hertz saga in mid-June, when the company suggested it might sell equity in bankruptcy given rampant speculative interest in its shares, which were busy going nuts amid a mania in "insolvency" stocks.
To be honest, I never had much patience for the Hertz story in the first place. That disdain was evident in my initial coverage. But taking advantage of oblivious retail investors by selling worthless shares only to hand the money to
I’ve given a lot of thought to the topic of this post in recent weeks, so I appreciate the analysis. I believe that the Fed’s back stop of the IG credit market (which I fully acknowledge offends my capitalist core) will not only lead to support in equities but also support in high yield corporates. We will likely get some bankruptcies in the High Yield sphere, but the Fed cushion on credit will inevitably spread beyond IG, once IG yields converges with S&P, some flows should find HY as appealing if not more than equities, after all, Jerome cannot press the buy button on stocks (yet).
“… the Fed cushion on credit will inevitably spread beyond IG … some flows should find HY as appealing …” Looks like they have. That Ford 8.5% issue is hardly IG. I have the 8.9% debs and they are below IG. (I’ve been collecting that 8.9% for going on nine years.)
Like the idea of barbell out of IG into HY and equities. Obviously short vol, so one might want to hedge that somehow.
So what was the path these speculators took? I mean how did it get o their radar in the first place? What was the pitch for buying insolvent shares.
I can see it i mean i started off “investing” in penny stock biotechs because i was a Biology student at the time. Working full time, and selling on ebay.
Once I learned a little about evaluating companies i got off of the roller coaster. Now if I screen out a potential stock I go right to the yahoo finance board and SA to make sure it has little or slow presence on the boards. Less manipulation. My biotech gambling experience taught me a lot. Worth every penny. Get if? Worth every penny… penny stocks