"as gm goes, so goes the nation": bill gross

[metalman]

Re: "as gm goes, so goes the nation": bill gross

didn't miss that thread. i stopped reading it when it quickly degenerated into ad hominem attacks on krugman instead of analysis.

was replying to nero.

no ad hominem attacks on krugman on the other thread, but such was asserted. don't agree. the thread asks why krugman parots the fire econ press green shoots/deflation talking points & has a record of selling fed policy.. . eg. 'deflation' cover for inflationary policy. i proposed the unearned nobel ecoon prize as evidence, financial oligarchs blindness... but you won't find any hard evidence... no published list of fire econ boyz... each can only be identified by words and deed, the things they say and don't say, do and don't do.

[metalman]

Re: "as gm goes, so goes the nation": bill gross

You can be certain that whenever Gross thinks or speaks it is for his own well being alone...............there isn't a magnanimous shred of DNA in his body.


He has begun a very peculiar game with the Fed and as we move closer to a bond market collapse he is to be watched closely and given a very wide berth.

glad i'm not him... tough racket selling bonds into a bond collapse... like a stock broker in a stock crash, or a rre or cre broker in a rre/cre collapse... except the bond market is, what, 10 x bigger than the stock market?

gross is always talkinghis book... to his credit he admits it. but his book is about to burn...

[c1ue]

Re: "as gm goes, so goes the nation": bill gross

1. the gm bonds are, iirc, general obligations unsecured by specific assets. a lot of the chrysler bonds WERE secured by specific collateral, and we know how well that held up.:rolleyes:

True, but I would not be surprised if the types of bondholders at Chrysler are different than the ones with GM. After all, Chrysler recently went through acquisition, then divestiture. In the process no doubt a lot of things were changed.

2. i'm still more interested in pondering gm as a precursor, in miniature, of the u.s.' future. the bondholders, as you say, would be interested in owning physical plant and/or ip, as well as real commodities, in preference to dilutable minority equity stakes. place against that politically inspired legal impediments that may be put in place to prevent that. [think unocal and dubai ports] in general, the bond holders will do best to swap out of their positions as soon as possible, possibly for 3rd parties' assets as long as those parties are willing to accept the bonds in return. say, isn't that kind of like pledging bonds as collateral for the [vendor?] loans to buy resources in, say, brazil? hmmmm....;)

True, but given that the public purpose of this present exercise is to nullify the GM debt/bonds - just how many dumb and ignorant possible customers are out there? At least with the dollar - the official position is still that it is backed by the 'full faith and credit of the United States'

Dont stockholders get a say in how the company is ran (through voting rights)? Bondholders only get a claim on property, stockholders get *power* to acquire more of it...

As JK noted, I was speaking on the bankruptcy process.

However you should by now realize that modern stockholders have zero say in how companies are run...unless they own all the company.

Modern companies use stock as a way of extracting additional money from outside sources.

[WildspitzE]

Re: "as gm goes, so goes the nation": bill gross

Gentlemen,

I may be wrong, but I thought bondholders were different than stockholders in that the bondholders had specific rights on collateral as opposed to stockholder's general interest in the company.

Thus a majority of bondholders voting for bond for equity swaps doesn't necessarily mean it will come to pass as the bond debt of a company is not a monolithic entity.

In the bankruptcy proceedings perhaps it just means that those bondholders in favor abstain on the plaintiff's bankruptcy working plan, but the remaining bondholders still have their claim.

As for ownership - I'd think owning the physical plant and/or IP is far better than dilutable stakes in stock. After all, we have the wonderful 'early' Citigroup preferred stock investors as an example. Sure, the government and C took better care of them than the common shareholders, but the result is still major losses.

debt holders and equity holders (the right side of the b/sheet) have a general claim on all of the assets (left side). the major [simplified] difference re: bankruptcy really is the priority in who gets the cash as such assets are converted to cash. meaning, who takes losses first (visualizing the capital structure, cash is allocated top down, and losses from the bottom up).

within debt, there are levels of further prioritization, those that have a security interest in the assets (or some assets) get to go ahead of unsecured debt holders and equity holders (for the specific set of assets they have a security interest in). if such assets aren't enough, then the secured debt holders then may sit alongside the unsecured debt holders on other assets (if any). you can have also different levels of subordination within secured debt. anyway, there are a host of ways that security interests are treated (and rights such holders have) within ch 7/11/13. it's complicated/messy and subject to code, case law, and judges -- and now, apparently to the white house's political whim.

to avoid this mess, in a securitization, debt holders have an ownership interest (rather than a security interest). it's different as they "own" such assets and can liquidate and/or restructure outside of the process (pursuant to their own agreements and the performance of their specific assets). secured/unsecured debt holders and equity holders of the company (in such priority) have a residual claim on the securitized assets as they have a residual claim after all of the obligations of the securitized debt have been met.

the debt (whether secured or unsecured) isn't usually one big facility, but constitutes several. each facility, if it has more than one lender per facility, will usually have a way of making decisions (voting).

that said, lending facilities usually include cross default language, as well as other language that is meant to protect them so that assets aren't taken from under them by other facilities or that they get inferior treatment (equal rights) to other lenders in other facilities. thus, practically, you do tend to see that upon a major event unsecured debt becomes rather homogenous.

however, if one group of debt holders (via their decision making process) agrees to certain things (such as subordination - e.g. equity swap) -- including waiving rights -- it doesn't mean that other facilities will or have to agree. if a large part of the debt chooses to convert to equity, then it is a lot easier (not to mention, actually do-able) to "buy-out" such remaining debt and get the company reorganized/restructured in a shorter time frame.

[WildspitzE]

Re: "as gm goes, so goes the nation": bill gross

Please tell me who is not a self serving asshole in this business? Maybe Krugman.

BWAAAAHAHAHAHA, post of the day.

[don]

Re: "as gm goes, so goes the nation": bill gross

Thanks for posting this, jk.

I don't like Bill Gross. IMHO he's a self-serving asshole if there ever was one, but he's a very smart (and prescient) self-serving asshole.

Best thumbnail of Bill I've seen yet. Good work!

[nero3]

Re: "as gm goes, so goes the nation": bill gross

was replying to nero.

no ad hominem attacks on krugman on the other thread, but such was asserted. don't agree. the thread asks why krugman parots the fire econ press green shoots/deflation talking points & has a record of selling fed policy.. . eg. 'deflation' cover for inflationary policy. i proposed the unearned nobel ecoon prize as evidence, financial oligarchs blindness... but you won't find any hard evidence... no published list of fire econ boyz... each can only be identified by words and deed, the things they say and don't say, do and don't do.

Selling? I think Krugman drinks the same cool aid as Bernanke. They are of the same breed intellectually speaking I think, plus there is a degree of loyalty to Bernanke as he is a Princeton guy, I suspect.

[nero3]

Re: "as gm goes, so goes the nation": bill gross

You can be certain that whenever Gross thinks or speaks it is for his own well being alone...............there isn't a magnanimous shred of DNA in his body.


He has begun a very peculiar game with the Fed and as we move closer to a bond market collapse he is to be watched closely and given a very wide berth.

I was starting to pick up from his monthly articles, in around the turn of the year, that it was "game over" for bonds. He is at least not a snake oil sales man as so many equity guys are. If he is an asshole, then that is probably a good thing that makes him money as empathy is not something that adds to the performance when it comes to making money.

[KGW]

Re: "as gm goes, so goes the nation": bill gross

I was just reading that in Korea, Japan as well, if a local buys a foreign car, they are immediately subject to a tax audit. . . Looks like "our" gubmint has overlooked such practices, to the detriment of Detroit. Other things like spiking tariffs when chosen, then lowering them so as to achive a low average tariff rate, etc., are used to discourage foreign penetration of markets.

But the U.S. keeps its market open to Korea and Japan.