| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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The Education of a Corporate Bond Manager, Part XI |
The Market Financial - Aug. 7, 2010 - by Staff and Wire Reports
I appreciate my readers. That doesn’t mean that I am the fastest to respond to e-mails, but I appreciate what they write, even when I don’t agree. But here is an e-mail very relevant to tonight’s piece:
Great series, David.
If you have more posts planned, it would be interesting to know what the biggest mistake you’ve made that you learned from the most.
In my short tenure as a corporate bond manager, I had a very good run in the midst of a bad environment. Sometimes I think my lack of formal training was a plus for analyzing a situation where little was going well.
But I did make my mistakes. One was Enron — don’t get me wrong, I urged the sale of Enron bonds, but was countermanded. Could I have argued the cause better?
Fast-growing company in a slow-growing industry.
Management that could not take criticism.
Growing profits, shrinking cash flow.
We had a peek inside the veil, because we had financed some of their private deals. The complexity was astounding.
Opaque balance sheet.
I made all of those points and still lost; my new bosses were not deep when it came to corporate credit; they were skilled in other areas of the bond market. I eventually ended up selling the Enron bonds at an unfavorable price. Would that I had sold on the date of the default, rather than a month later.
Then there was the Teleglobe situation, where I erred in many ways. BCE, Incorporated had a unregulated subsidiary called Teleglobe. Think of Global Crossing, and other marginal telecom ideas. BCE was a sound company, and they offered verbal support for their subsidiary, but would not put it into writing, and formally guarantee their debt.
I did not know the company well, and I had no stock price to give me aid. Stock prices are more sensitive than bond prices, and can give warnings before bond prices move dramatically. My analyst went off to a telecom/technology conference, where the S&P analyst disclosed over dinner that she was likely to downgrade Teleglobe because of the lack of explicit support from the parent company.
Now given the broader picture, this should have been obvious. There were too many situations where implicit support did not translate into real support, and Teleglobe, most than most, needed support.
My analyst called me after the comment from the S&P analyst, and I asked, “Should I sell?” He said I should wait; he wanted to gather a little more data. We had our opportunity to sell at $90, and waiting missed that. By the time he returned, the S&P analyst indicated that a downgrade was likely, and the pseudo-price fell to $70. But, we were now determined to sell.
So I called my favorite broker, who was at the only firm making a market in Teleglobe bonds.
DM: “What’s the market in Teleglobe bonds?”
FB: “$68/$72.”
DM: “Very good. I sell you $XX Milllion of Teleglobe bonds at $68.”
FB: “I’m sorry, that’s not a real market, that is an indicative market.”
DM: “So where is the real market?”
FB: “We’ll take an order from you.”
DM: “You mean there is no real market? You brought this deal to market, you have to maintain a market.”
FB: “We’ll take an order from you.”
DM: (Pause) You have an order for $XX million Teleglobe bonds at $65.
FB: “We will do our best for you.”
For the complete article visit The Market Financial
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