The name of the game

[Supercilious]

Harley Davidson it's getting a bailout too...

http://news.bbc.co.uk/2/hi/business/7868456.stm

Motorcycle firm Harley-Davidson has secured a $600m (£418m) cash injection, including $300m from billionaire investor Warren Buffett.
The funds will help the iconic US firm improve its cash base, after losses in its financing arm saw it post a 58% fall in profit for October to December.
The other $300m comes from investment group Davis Selected Advisers (DSA), Harley-Davidson's biggest shareholder.
Harley-Davidson announced last month that it is cutting 1,100 jobs.
This represents more than 12% of its workforce. It is also trimming production by up to 13% this year.

Generous interest
The announcement of the fresh investment saw shares in the Milwaukee-based company rise as much as 23%.
Mr Buffett's Berkshire Hathaway company and DSA will be paid an annual interest of 15% for their investment.

Am I the only one who sees a pattern here? Anybody remembers those 30y treasuries @ 14% ?

[metalman]

Re: The name of the game

Harley Davidson it's getting a bailout too...

http://news.bbc.co.uk/2/hi/business/7868456.stm


Am I the only one who sees a pattern here? Anybody remembers those 30y treasuries @ 14% ?

yes i do. has there been another time when the spread between corp. and gov't bonds was so huge? 14% corp. says 'big default risk' while 14% 30 yr treasuries says inflation'. in retrospect... 20/20 hindsight... 30 yr treasuries at 14% had only one way to go... up in price. but corp. bonds at 14% have two ways to go... up or sideways or up in smoke. that said, buffet doesn't often bet on 'up in smoke' but has lately. i do see a meme running around the net that corp. bonds are undervalued. but... that assumes more-of-the-same obama changes his tune... and this is key... before the company whose bonds you're buying goes tits up.

[Supercilious]

Re: The name of the game

i do see a meme running around the net that corp. bonds are undervalued. but... that assumes more-of-the-same obama changes his tune... and this is key... before the company whose bonds you're buying goes tits up.

Yup. I believe you are right and it is important to be able to figure out which companies will go belly up and which companies will benefit from the Change. Hmmm... I guess Sir Warren got the appropriate memos.

Another interesting thing is that the name of the game is preferred debt (although I may be actually preferred convertibles), the small investor or the little guy managing his own retirement savings has absolutely no chance to get a fair share of the Obama Recovery. Nothing new under the sun.

[c1ue]

Re: The name of the game

The key takeaway for me is still the same: Sir Warren may talk a good talk, but his money is not walking the walk.

He is still 'investing' via senior debt as opposed to common stock.

This tells me that stock values are nowhere near 'Sir Warren' purchase valuation levels.

As for Harley surviving - I'd have to look into it more. I don't know what their overall debt levels are vs. their longer term corporate performance.

The huge danger with this company is that they inordinately benefited from a combination of things: 1) Boomer motorcycle love 2) Credit economy 3) Economic prosperity in the upper financial deciles

While there will always be SOME demand for the hogs, on the other hand the 'greenies' of today aren't likely to be wanting the monster gas guzzler motorcycles Harley produces, nor are either the American demographics post Boomer nor the economic situation very promising.