ISM/OSM yet again

[haha]

Originally Posted by youbet

Still, if I thought they were going to default, I'd take my $4/share loss like a good boy and just chalk it up to lessons learned......like all the other losses I've taken over the years.

I think at this time and at these prices, it is probably a reasonable risk to take, as part of a diversified portfolio. I don't think the comparison with Vanguard Hi-Yield is necessarily a good one. That is diversified, this is a one shot deal. And, I wouldn't touch VG Hi-Yield at this time.

Ha

[youbet]

Originally Posted by haha

I think at this time and at these prices, it is probably a reasonable risk to take, as part of a diversified portfolio.

I do too, as long as it's a small position! I frequently own several small positions in various "adventures" (or so they seem to me) so that I'm interested, pay attention and learn something new. And this one has been very interesting, a completely new area for me.

Here's an interesting read giving an opinion as to why having the buyout fall through is theoretically good for the bond holders but in the case of SLM, not enough and it seems to be a lose - lose for the bond and equity holders.

US CREDIT-Scrapped buyout may not help Sallie Mae | News | Markets | Reuters

[youbet]

The CPI-U data for November is out. 4.3% increase year to year. That means ISM will pay 6.36% for the Feb 15 - March 14 period on a par basis. Multiply that by $25/your price to get your yield.

If you bought today at $17.5, your yield for the Feb 15th period would be 9.1%. YTM would, of course, be higher.

[clifp]

My holding these bonds is more fun than watching the Daily Show. The not so bad news is the dividend is likely to be cut, sucks to be a stockholder in that situation, not horrible to be a bond holder.

The bad news is just when we thought that management of SLM couldn't get any worse we learn differently. An analyst write up of the conference call with the new CEO.

Here’s one analyst conference call that won’t put you to sleep.
At the beginning of Sallie Mae’s telephonic rendezvous with its investors today, CEO Albert Lord (left) mentioned the buyout deal for the company that fell apart last week. “I’m going to attempt to engage in a little self-defense, hopefully not defensively,” he said. He then proceeded to do just that.
A conference call that will live in infamy, along with that famous Enron call where Jeff Skilling called an analyst a naughty name, started out innocently enough. “The purpose of this call really is to reacquaint myself with you and you with me and try to create some transparency by me as CEO,” Lord, who reassumed that role last week, began. (Transcript courtesy of Thomson Financial.) But things went down hill from there.
First, he snapped at an analyst for asking a follow-up question: “This is the last question I answer that’s more than one part.” Then another analyst beseeches Lord for more data the analyst can use to make forecasts and for more details of Lord’s forced sale of his own shares in the company last week. Lord demurred, saying the analyst should call Steve McGarry in investor relations. The analyst pressed: “But, you’re the CEO. You’re the guy who just took over the Company.” Lord’s response: “Yes, that’s exactly right, I’m the CEO. You should give Steve a call. Next question.”
Lord then recommended that analysts be prepared to go through a metal detector when they attend the company’s analyst meeting in New York in January. Then things really spiral downward. When it appears that no one else wants to ask a question (can you blame them?) Lord says: “How (inaudible) is this? Steve, let’s go. There’s no questions, let’s get the (expletive) out of here.”
Don’t look for that climax in the version of the call Sallie Mae posted on its own Web site. That part was dropped.

[youbet]

Originally Posted by clifp

My holding these bonds is more fun than watching the Daily Show. The not so bad news is the dividend is likely to be cut, sucks to be a stockholder in that situation, not horrible to be a bond holder.

The bad news is just when we thought that management of SLM couldn't get any worse we learn differently. An analyst write up of the conference call with the new CEO.

It sure is! I tell ya, this has really been entertaining.

[twaddle]

SLM is getting decimated. $20/share just a few months after a $65/share offer!

I bought some today. I didn't even look at their financials. They've obviously got some tough times ahead and a lousy CEO, but I just love it when a solid business gets beat-up like this.

[haha]

Originally Posted by twaddle

SLM is getting decimated. $20/share just a few months after a $65/share offer!

I bought some today. I didn't even look at their financials. They've obviously got some tough times ahead and a lousy CEO, but I just love it when a solid business gets beat-up like this.

Me too.

I think the analysts who got dissed by Stupid Lord yesterday are showing him who is boss.

Face it- Flowers is no dummy. He figured that with very favorable terms he could make it work at $65. Even recently he was interested in doing the deal at $50.

Maybe congress did make the playing field a bit less tilted in SLM's favor, but $20.xx? Looks like a margin of error to me.

This is no Proctor and Gamble, but I am not in a position to limit myself to stocks of that quality anyway.

One thing I did learn from my narrow escape with ISM, OSM. No matter how tempting it appears, take it easy on size.

Ha

[Darryl]

I definitely need to stay off the computer. I just placed a small limit order at $20 assuming it trips, you guys holler when your selling as I put a little less research in than twaddle.

Heck I guess it's better than buying lottery tickets

[haha]

Originally Posted by Darryl

I just placed a small limit order at $20 assuming it trips, you guys holler when your selling as I put a little less research in than twaddle.

Fat chance of that! When it was time to get the hell out of dodge with ISM/ OSM, people went on little cat feet.

Hey, I felt virtuous not to advise that folks step up their buying.

Although there shouldn't be the trading liquidity issues here that exist with ISM/OSM.

Ha

[Darryl]

Lol

[FIRE'd@51]

I've been adding to my OSM position below 17, so as long as you guys keep collecting a dividend on the common, I'll be happy.

[cute fuzzy bunny]

You guys must be realllly holding your nose to be hanging onto this stuff, let alone buying more of it.

But I guess thats what makes investing heroes...and zeros....

[youbet]

Originally Posted by cute fuzzy bunny

You guys must be realllly holding your nose to be hanging onto this stuff, let alone buying more of it.

But I guess thats what makes investing heroes...and zeros....

We're looking for a taxpayer funded bailout.

[cute fuzzy bunny]

Ahhhh! You cant beat 'em, so join 'em?

Thats a good one!

I'm going out to sign up for a 100% 2/28 interest-only arm later on today. In three years all of you will be paying my mortgage payments!!!

[haha]

Damn! Down $1300 in one morning's trading.

¡Vamos a ver que será!

[Darryl]

My order tripped at $19.90 and the volume is so small I can still afford to buy groceries.

Peter Lynch said a lot of different investment tactics have worked for him over the years, there is only one technique that consistently lost him money and that was bottom fishing. Personally I have taken several beatings over the years bottom fishing and here I sit with you guys bottom fishing

[cute fuzzy bunny]

[youbet]

Originally Posted by Darryl

My order tripped at $19.90 and the volume is so small I can still afford to buy groceries.

Peter Lynch said a lot of different investment tactics have worked for him over the years, there is only one technique that consistently lost him money and that was bottom fishing. Personally I have taken several beatings over the years bottom fishing and here I sit with you guys bottom fishing

Sooooo...... you Vegas Night investors enjoying harvesting the nice run-up in SLM since it dropped below $20 the other day? Looks like a quick 10%. You owe me. I didn't buy, even with back-of-the-sock-drawer funds. If I had, then it would have continued to drop!

[haha]

Originally Posted by youbet

Sooooo...... you Vegas Night investors enjoying harvesting the nice run-up in SLM since it dropped below $20 the other day? Looks like a quick 10%. You owe me. I didn't buy, even with back-of-the-sock-drawer funds. If I had, then it would have continued to drop!

This was Vegas Night. I have purchased a few knocked down things this fall, and later thought what the heck am I doing? I'm retired for heaven's sake!

So far the markets have cooperated and allowed me out with small gains. But it is actually stupid behavior for someone in my position I think.

SLM could get another offer at $40 I suppose, or could get some financing. But no one is going to give Lord much (or anything!) without getting very good terms, and at least some control or an easy exit.

OTOH, it is not impossible to imagine this going very sour. It is probably still a good business, but I have no way of knowing. Although their balance sheet looks fine, they sold puts that I believe come due in February and they need financing to retire these, and they need financing to keep their barely investment grade credit rating. So I think at best, my risk reward is about 50:50, and I can’t see any reason to place a markedly higher probability on the winning case.

One of my rules is to avoid this situation. Another is to only buy a “fallen angel” when management is also buying in meaningful amounts. While there may be technical or compliance reasons why that has not happened in SLM’s case, do I know that?

Hence, when Mr. Market gave me an out today with a small profit I took it. I feel like wimp, as usually I let a bet ride, as I feel if you take the risk, you need to hang around for the reward. But IMO I was shooting from the hip on this one.

Good luck to those Bravehearts who remain long!

[Darryl]

Ha, Thank you for the shout on the way out (No cat feet).

I'm staring at the 10% for a days work and considering it. I'll call it when I go, not trying to be a hero here either and I did keep the bet small.