Friday, June 11, 2010

Attention CFOs !!!

Today I giving orders to corporate CFOs (Chief Financial Officers).

I know you may be sitting on top of a mountain of cash per today's WSJ article: "U.S. companies are holding more cash in the bank than at any point on record, underscoring persistent worries about financial markets and about the sustainability of the economic recovery. The Federal Reserve reported Thursday that non financial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952. Cash made up about 7% of all company assets, including factories and financial investments, the highest level since 1963."

And some of you have sold notes & bonds to raise cheap money. BUT most are making a fundamental error. When long term money is cheap, GET IT AND GET AS MUCH AS POSSIBLE.

Sell long term bonds - lock in low rates for 30 year bonds. Fund all your foreseeable and unforeseeable funding needs for the next ten years with fixed rate debt with terms at maturities of at least 10 years, preferably 30 years. Prefund any maturities coming with the next five years. DO IT !!!

Stay away from floating rate debt and short and intermediate term maturities. If you want lower floating rates for awhile, do a short term interest rate swap against the long term bonds.

Give the CEO a war chest to use to build and grow the company NOW as record low fixed rates. This will increase the value of your company immeasurably over time.

Now for investors ... wait, don't buy that long term debt. Let the pension funds and insurance companies and mutual funds who have to buy do the buying. Wait. Soon the US economy will start to perk up - maybe late this year, and then rates will start to rise. If you buy now, you can easily lose one or two year's of interest in price declines. Wait.

Actions

I'm tempted to buy some BP, but will wait. IF the oil spill hits the beaches on the west coast of Florida, I think BP will go to zero as the damages will be incalculable.

Word of the Day

"Homeostasis" - noun [$10]
Homeostasis means a tendency towards relatively stable equilibrium between interdependent elements, esp. as maintained by physiological processes.
Sentence: I doubt the markets will achieve homeostasis until hedge funds are regulated heavily and have much less money. Until then, asset allocation trades will rule: buy low, sell high AND sell high, buy low. You must do BOTH.

23 comments:

maverick said...

Bman....where are you putting your cash these days?

niziol said...

Hello everyone; just trying whether this works...

Bunkerman said...

I'm putting my cash in ... cash these days. Waiting.

Bunkerman said...

Yup, it works ;)

Bunkerman said...

Welcome to a completely free blog - no moderation or editing ... pure verbal freedom.

Lol, "almost none" - I only edit threats bordering on assault.

Bunkerman said...

I am waiting for lower stock prices OR lower TIPs prices.

Bman the Paladin -> "Have Cash, Will Invest".

Bunkerman said...

Addendum: or lower RE prices or lower gold prices or lower bond prices.

Frosty said...

an estimate from Goldman Sachs analysts say that it will cost $40,000 per barrel for clean-up, litigation and other costs related to the spill, which at 40,000 barrels per day puts potential liability at $80B for BP (BP). At 30,000 barrels per day, now believed to be a very credible estimate, BP may be looking at $60B in liability. At the high end of 50,000 barrels per day, we are looking at $100B.

Bunkerman said...

clean-up is just part of the cost. The economic damages will be huge if the west FL coast is hit badly.

I expect eventually the Gulf states will sue BP (if not already) like the tobacco suits.

Bunkerman said...

hmmm GS must be getting close to book value ... but do I want it there ?

;)

Frosty said...

Goldman Sachs analysts say that it will cost $40,000 per barrel for clean-up, litigation and other costs related to the spill,

Uh GS is speaking all related costs...your anti semitic attitude has blinded you to the point you can't read a simple paragraph...enough with the jew bashing sir.

Bunkerman said...

uh .. I beg to differ IFF it hits the FL west coast.

GS ... what a bunch of knaves.

Bunkerman said...

How can GS even estimate damagees if they don't assume a track for the slick ?

Boob bait ... for their customers.

Frosty said...

is it safe to assume that your nonprofit is akin to the hitler youth movement sir?

Bunkerman said...

nfw. frosty.

OUR new non-profit is every pro-America, to help the common man & woman.

Spin-em said...

OOR....loooooooooool



ps...cya niziol

Bunkerman said...

here is the first Clause of OUR articles of organization ->

(A) To provide education and knowledge to the people of America in the means, methods, and motivation for the economic and physical restoration of the nation;

...


Very altruistic !

Frosty said...

your kidding right...on the hunt for friday MVP...nonono swing here pal.

Bunkerman said...

no I'm not kidding ... I'm doing this with a couple of old HS friends to help the USA, the common man, but first my hometown.

USA USA USA

Bunkerman said...

maybe I'll offer T-shirts as prizes later

;)

Bunkerman said...

have a good weekend ... bunktinis tonight

maverick said...

enjoy Bman....bottoms up

Frosty said...

cheers Bunky...good weekender