Here, at your fingertips, are more than 35 years’ worth of issues and articles. Search by date, company or keyword.
John Dizard writes: The force of gravity made its expected comeback in the LDC debt market, with prices for the Latin American loans giving up some of the gains they made this fall. The big news, though, or at least the big talk, was about the Bank of Boston's action in charging off $200 million in loans to less developed countries...
The new Grant's Stub Stock Index debuts in this issue on page 11. A stub is a stock in an ultra-leveraged company. In the palmy days of summer, stubs were also known by the dignified term "residual equity interests." Our index is an average of the prices of eight such specimens...
When Moody's Investors Service said it was warming up to lower the boom on the debt ratings of a dozen money-center banks, it cited, among other reasons, "the sharp decline in secondary market prices for LDC bank debt." Grant's, too, has had its eye on LDC prices. We have noticed that they have gone up.
Balance-sheet ratios are conventionally computed at book values. Why? For years, Drexel Burnham Lambert has sponsored a market based measure of corporate capitalization. Its idea was the market-adjusted debt, or MAD, ratio. Let the market decide what a company is worth. Take the debt portion of that valuation and divide it by the overall market cap. The answer is MAD. It is not quite that simple, of course, and Drexel from time to time has introduced statistical refinements and caveats to the basic idea...
Marshall S. Cogan is the chairman and chief executive officer of Knoll International Holdings. He controls the board of directors. He controls the company (it used to be General Felt). In 1986, the company paid him $3.2 million, cash. Possibly nobody outside the Post Office is more securely employed.
On November 17, the bank research department of Salomon Brothers figuratively pounded the table: 'Against the backdrop of massive industry restructuring, a modestly favorable economic climate and significant earnings momentum in 1988 and probably 1989, we believe that, for the first time in this decade, the money center banks are poised for a significant secular uptrend in valuation levels that could persist for several years."
Before the birth of Dan Rather; stock-market panics were outdoor events. Crowds milled around the Stock Exchange and lined the steps of the sub-Treasury Building, hatching rumors, planning bank runs and proving what misery loves. The 1987 collapse represented a technological breakthrough. The weather was perfect -- sunlight as thin as skim milk beamed from a clear blue sky -- but everybody was indoors watching a screen.
The global collapse of stock prices, though initially shrugged off at the White House and in the financial advice columns of the New York Post(hold on, the Post counseled its mutual-fund-owning readers under the postcrash headline, "Rally-ho"), was taken hard by the high-yield debt market.
Edward I. Altman, professor of finance at New York University, co-author of Investing in Junk Bonds: Inside the High Yield Debt Market and consultant on high-yield securities, formerly to Morgan Stanley and currently to Merrill Lynch, has produced a new study that his clients may wish he hadn't.
John Dizard writes: "Along with the Sri Lankan stock market and gold bullion, Third World debt prices rallied in the week of the crash. Among widely traded credits, prices rose by two and three points. Mexico jumped from a bid of 49-1/2 before the stock market break to a peak of 54 afterwards. "What happened...?
Last November The Wall Street Journal disclosed that an athletic young trader at the Tokyo office of Salomon Brothers would choreograph a rising market by leaping on top of his desk and yelling "bond fever!". There were plenty of rallies in those days, plenty of traders and lots of bonhomie. Nowadays, naturally, people are more inclined to hide under their desks than to jump on them, but the visceral style of investing is dominant again.
The House Democrats' package also would deny deductions for interest expenses exceeding $5 million a year on debt supporting either the acquisition of the majority of the stock of another corporation or a company's redemption of a majority of its own stock. This change is designed to remove the tax incentive corporations now have to replace equity with debt in order to reduce their taxes. -- The Wall Street Journal, October 14.
FICO, the quasi-governmental agency created to recapitalize the Federal Savings and Loan Insurance Corp., has already made its mark in the credit markets. By borrowing for 30 years and collateralizing that loan with zero-coupon government bonds, the agency has rearranged the zero-coupon yield curve. It has caused a decline in the yields on long-dated zeros and a rise in the yields on short-dated ones. Bargain hunters in the government market, please copy.
Big banks are in the leveraged lending business up to their hips, and not only for their own accounts. Gone are the days when loans were made to be planted on one's balance sheet; increasingly, as noted last issue, loans are made to be sold, or "participated," to other banks, so that the LBO-type of loan is communicated from institution to institution like a virus.
"The wealth-building community has been abuzz since Ivan Boesky, exchanging a large check for some juridical leniency, agreed to assist the authorities in cracking the insider trading ring. The persistent question these many months is which big fish would be the next to fry...
More dollars zip around the world on an ordinary day than you can imagine. Currency speculators, bond traders and (let us not forget) importers and exporters deal in dollars. CHIPS, the Clearing House Interbank Payments System, which has a membership of 138 banks worldwide, handles daily transactions of $550 billion...
As recently as 1986, the bond market was boiling. It was as plain as the nose on your face that interest rates were falling, and would keep on falling. However, as government bond prices surged, corporates hung back. In that distant time, bonds were thought to be precious, and the risk of losing one's position to early call was high on the market's worry list.
If Joe Rosenberg, chief of speculation at Loews Corp., were really bullish on bonds, he would own 30-year governments. As it is, he is not quite really bullish, and he owns 10-year notes. He is not yet ardent about bonds and not fully invested.... As you may recall (Grant's, April 6), Rosenberg is a connoisseur of financial extremes...
[D]ebt relief is an ancient topic on the Anglo-Saxon political agenda. In 1215 at Runnymede, King John specifically addressed his archbishops, abbots, earls, barons, foresters, sheriffs, stewards, servants, officials and other loyal subjects, some of whom, evidently, owed money. "If a man dies owing money to Jews," Clause 10 of the Magna Carta helpfully stipulated, "his wife may have her dower and pay nothing towards the debt from it."
A friend proposes to strike it rich in gold by giving the public what it wants. What the public wants is mining stock. We know that by the stupendous valuations accorded mining companies at a time of stable gold prices. People want mines -- so let's give them mines, our friend proposes. Let's buy some gold, bury it, dig it up and sell it.
It is an article of faith among sophisticated people that the stock market knows something. It is thought to know more than the "Blue Chip" economists, for instance. It is known to be deeper than the hapless panelists in The Wall Street Journal's semiannual interest-rate-guessing contest.
John Boland writes from Baltimore: Scouting Texas for survivors is sort of like riding a hundred yards behind a war party still collecting scalps. But a burned-out Dallas homestead -- BancTexas Group Inc. -- has attracted the British investors who control New York's Hallwood Group Inc.
Harcourt Brace isn't the first U.S. company to repulse an unwanted bidder by means of a leveraged management recapitalization. Apparently, however, it is the first company to attempt that gambit without obtaining a fairness opinion from an investment bank. Harcourt's financial adviser is First Boston.
The stock market is way up, but corporations continue to buy their own shares -- in leveraged buyouts, recapitalizations and stock repurchases -- instead of selling them. The new issue market slumbers. The stocks of leveraged companies, for the most part, prosper. The bark you haven't heard is the bark of new-equity issuance.
To stay-at-home observers, the boom in worldwide money growth may come as news. After all, Federal Reserve policy is even-keel, at best, and growth in the M's continues laggardly. Nevertheless, to quote the latest edition of Merrill Lynch's weekly Currency and Bond Market Trends: The rise in interest rates in the various bond markets around the world is not just coincidence....
When The Yankee Cos., a savings bank and energy company all rolled up into one, issued $45 million of 10-year, 12-5/8% notes last November, no red flags were hoisted. The notes, though rated B-2 (middling speculative grade) by Moody's, were secured by equity interests in the company's subsidiaries.
U.S. Trust Co. of New York announced today that it is refocusing its business and, in this connection, will restrict the types of loans it makes and will seek purchasers for a portion of its business loan portfolio with an aggregate value of about $275 million. -- press release dated July 13.
Cain Chemical is an LBO-type borrower with a new-era-style balance sheet... Its pro-forma capitalization consists of $19 million in equity, $85 million in preferred stock, $11 million in warrants and $874 million in long-term debt. The chemicals business is reportedly doing fine.
A couple of issues ago, Grant's dived headlong into the mathematics of bond investing. One thing led to another, and the discussion turned to the reinvestment problem. The reinvestment problem is a burden of the creditor class. It is the question of how to invest one's interest income.
The proposition . . . that the relationship between a corporation and its directors and debenture holders is contractual, not "fiduciary," in nature, is well settled in this state. -- Jack B. Jacobs, Vice Chancellor, Delaware Chancery Court; memorandum opinion in Continental Illinois National Bank & Trust Co. vs. Hunt International Resources Corp., February 27, 1987.
The youngest stockbroker in the country drives a 1959 Corvette. He is about to install a car telephone to facilitate mobile, two-way communication with his clients, whom he was recently obliged to call from a public phone in the hallways of Greenwich (Conn.) High School. Daniel Stein, 17, graduated in June...
When Telerate recently added a third decimal place to its continuously updated Treasury-bond yield display -- suggesting that precision in yield to the thousandth place is a negotiable piece of financial information -- a light bulb should have clicked on. It didn't, but Ron Ryan, founder of the Ryan Financial Strategy Group and a fount of ideas on fixed-income subjects, had some helpful comments.
As every schoolboy operating in the Chicago bond pits knows by now, the Commodity Research Bureau Futures Index is down. The most closely watched commodity index, the CRB, terrified the bond market on the way up. Now that it is off its highs, the market is breathing easier.
Robert L. Clarke is the Comptroller of the Currency. The Comptroller's franchise is unpalatable facts. Possibly he is too negative -- as he would be the first to admit, there are notable pockets of strength in the banking business -- but his arguments always get a sympathetic hearing around here.
The market in publicly traded Third World bank debt was paralyzed by Citicorp's $3 billion disclosure. Traders, assuming that $5 billion to $10 billion in new supply was about to land on their heads -- only $8 billion's worth changed hands in 1986, according to Salomon Brothers -- did nothing.
Owens-Illinois Inc. was founded in a panic year (1903), reorganized in another panic year (1907) and restructured in a blue-sky, onward-and-upward year (1987). It is the nation's leading manufacturer of glass containers, with interests in plastics, forest products, health care and mortgage banking, and it has rung up five years of rising net income on flat sales...
At or near a market top, Omniscient Securities, the perfect brokerage firm, would startle the Street by scaling back. It would stop hiring, cut trading positions, slash overhead and shelve plans for a move to sumptuous new bull-market quarters. Seeing the future clearly, it would do exactly what Drexel Burnham Lambert, under the gun of a federal investigation, is doing. It would retrench.
As the bond market lost consciousness the other day, an economist was plaintively quoted in The Wall Street Journal. The man, identified as a bank economist, complained that the Federal Reserve has abdicated financial leadership. Nobody was running the bond market any more.
The question of the hour, now that yields are up, is when to buy bonds again, and that was the question we put to Van Hoisington, the bond investor who has been bullish and right for most of the past three years. Hoisington is safely out of the market now -- got out in March, just before the deluge, and he says he's grateful, not proud.
As statesmen talked up the bond market Thursday, the commodity markets rallied all by themselves. The Commodity Research Bureau futures index vaulted above the 220 mark (which the Street has been conditioned to view as a kind of inflation threshold), and the spot industrial commodity price index thrust to new recovery highs.
Corporate credit quality continues to sink, with banks deteriorating even more briskly than industrial companies and with utilities showing some new signs of weakness. There had been predictions of a credit turnaround in 1987, but the news to date has actually been worse than it was in 1986...
Joe Rosenberg is a connoisseur of extremes. His investment policy is to keep his head when all around him are losing theirs -- and then to buy or sell the ears off the appropriate market. He has scored his biggest coups when the crowd was either gleeful or despairing, for, as he has said, "our greatest dreams and worst fears are never realized." His style is to foul off a few pitches but ultimately to connect, and over the years he has hit for power and average alike.
The Federal Reserve disclosed a stunning $7.5 billion rise in the volume of U.S. government securities it holds for the accounts of foreign central banks. It was a gigantic surge and mirrored the staggering scale of central-bank intervention to support the dollar.
Since long before the buttonwood tree, man has searched for the surefire investment. South Sea stock, canal bonds, utility-holding-company shares, U.S. savings bonds, growth stocks -- each has gone up, but then again, each has gone down, too. Now comes Chase Manhattan Corp. with a new idea.
The pell-mell growth of the perpetual floating-rate note market in London was news. Its periodic collapse has been news. But its easygoing approach to credit and its big-picture impatience with details haven't been treated as news because they aren't news. They are its signature.
A year ago, what the market wanted was current-coupon government bonds... As yields collapsed, the market acquired a taste for off-the-run governments... Lately, of course, the market has turned to almost anything. Yield spreads have narrowed throughout the corporate sector, and junk bonds have shone.
During the recent Brazil fever, the free-market price of Brazilian bank debt was quoted as low as 61, down from 75 in late January. Bank stocks came under pressure, but an off-the-record meeting of institutional investors was treated to a novel and bullish view of Citicorp. And a new blind pool was successfully (and ironically) launched.
Last fall in the credit markets there was a flight to quality, but this year the traffic has been in the other direction. Junk bonds have run rings around Treasury bonds, and the stocks of leveraged companies have soared. Also, on Thursday, strange to report, money center bank securities did not fall out of bed.
Alan C. Greenberg, the multi-millionaire chairman and chief executive of The Bear Stearns Companies, answers his own phone when he can (that's 212 952-5843) and returns his own calls. "We make it a policy that all calls must be returned," he wrote last year to the shareholders in a message that must have given some of them a guilty twinge about their own telephone etiquette.
A leading non-expert on Japan, Grant's nonetheless devoted most of its last issue to the topic of Japanese speculation. We did so because, by our amateur lights, Japanese finance has stepped off the deep end and because we were tired of hearing the broker's litany about Japanese liquidity.
All monetary indicators continue to point to easy, easier, easiest. Our Index of Monetary Pressure (page 10) is about as low -- i.e., easy -- as it has ever been, thanks to another massive case of free reserves. Banks continue to hold back substantial excess reserves and to borrow only sparingly from the Fed.
The world may or may not be shrinking, but it is definitely becoming more optimistic. The most successful investment theory of the year is that bull markets are internationally mobile, like Communist insurgency, and that the wild esprit of the Tokyo exchange is about to infect New York.
Japan is the international graveyard of bears. It is the nation of the housewife speculator and of the sure-thing stock at 50 times last year's lackluster earnings. It is home to zaiteku, meaning high-tech investing, and of institutional traders of the bull-market genius class, celebrated by the name of Shinjinrui, meaning new men. It is the land that Graham and Dodd forgot.