Oddly Relevant Feb-13-2013

Hunt for yield sows junk-bond boom: for scores of European companies that had been shut out for much of last year. Last month, European companies with a “junk” rating issued nearly $16 bn in bond, the most ever in January. [Note: while I don’t doubt the existence of value, it’s caveat emptor really]…Source: http://online.wsj.com/article/SB10001424127887323511804578300031270988040.html

The secretive CDS committee is having a bad month: The issue revolves around the nationalization of SNS Bank—is that a credit event? The Isda committee cannot reach an agreement, since the government bails out the firm, becomes the only holder, and skirts the definitions of ”multiple holder” that could trigger the restructuring clause. If the government first writes down the principal to zero and also restructures the bonds so that no more interest is due, then by the time the next payment rolls up, it won’t be a failure to pay anymore…Source: http://ftalphaville.ft.com/2013/02/13/1383992/the-non-precedent-setting-own-law-making-secretive-cds-committee-is-having-a-seriously-bad-month/

The urge to merge could be about to return: From a financial point of view, conditions now favou\r deal-making. Credit is cheap. Balance-sheets are unusually strong. Many firms have voluminous cash reserves. Yet bosses remain timid. A bungled acquisition can wreck a career. Boards are far less indulgent than they used to be of imperial chief executives. Having spent the past few years obsessing about risk management, directors may not easily be persuaded to support even straightforward deals. [Note: always hungry for more]…Source: http://www.economist.com/news/business/21571475-urge-merge-could-be-about-return-shall-we

Black swan farming: Another piece by Paul Graham about VC investing: “We're in a business where we need to pick unpromising-looking outliers, and the huge scale of the successes means we can afford to spread our net very widely. The big winners could generate 10,000x returns. That means for each big winner we could pick a thousand companies that returned nothing and still end up 10x ahead.” [Note: It’s a tough racket]…Source: http://www.paulgraham.com/swan.html