Harley Davidson (HOG) is up 20% today showing why, in a bear market, even shorts can easily get slaughtered. Much like the cheering when Buffet came in with "financing" for
Goldman Sachs (GS) [
Sep 23: Warren Buffet Finally Decides to Start Buying Distressed Assets] and
General Electric (GE) the shorts have to scramble to get out of the way (both those stocks have fallen roughly 50% since Buffet got involved) and you get a short squeeze. Berkshire is back extracting
very onerous terms on Harley but the peanut gallery cheers....15%!!! So to "make money" on this I guess they will charging Harley buyers 20%? Great deal for Berkshire...
- Harley-Davidson Inc. said Tuesday it priced $600 million in new debt to fund motorcycle lending at its troubled financing unit. Berkshire Hathaway Inc., the company owned by billionaire investor Warren Buffet, and Davis Selected Advisers LP, the company's biggest shareholder, both agreed to purchase equal portions of the principal amount of the new debt.
- The new senior unsecured notes will be due in 2014 and will carry an annual interest rate of 15 percent.
HOG is up from $12 to $14 on this news; I'd love to see it nearer to $16 to get my grubby hands on some short exposure.
No position
6 comments:
TM - It looks like 15 would be the call turning back just short of the gap and 50 dma. What say you?
14
I actually think $14 is a pretty good entry; I am just being greedy and wishing for $16. (actually upper $15s)
I am trying to not overdo the short side until we see a break in the S&P. CNBC alerts and Fridays action on employment report could drive a lot of bad stocks up if traders "love the news".
I think HOG has a good chance to see single digits sometime in 2009 as people come to grips with the reality of the economy.
Unfortunately this market has a lot of "news announcement risk" which makes it hard to get overboard on shorts ... its just annoying to see all the "bad stocks" swept up in euphoria on these 3-4%+ days ...
I still can't get over 15%... that is pure junk bond world.
THis is a complete joke. One has to question Warren's senility at this point. He is up to the gunnels in WFC, yet has money to piss away on HOG> Any company that needs to pay 15% for financing has to be a major league short!
Buffet is building his own junk bond ETF it appears.
I don't think the deal is bad for him as long as Harley stays in business... if you think the recession ends in '2nd half 2009' or '1st half 2010' and we are back to normal or somewhat close than it should be a great buy. Otherwise probably some sweating to do I am sure there is some franchise value to the brand. The problem is the finance arm is a joke.
Whats going to be funny is how we are going to relax credit rules this year due to the flood of easy Fed money and then be dealing with a boomerang of defaults circa 2011.
Re: "Any company that needs to pay 15% for financing has to be a major league short!".. True.. But he's lending them the money.. Does he really care about the company? I suspect Warren is more concerned with BRK.... Speaking of which, anyone had a look at BRK these days?? I don't follow BRK-A, because one share would clean me out and leave enough for a cheap Chinese lunch, but BRK-B is down from $4700 and change to about $300 from its November lows..... My, my, my!!! I've never really been keen on conglomerates ... Just look at GE... There always seems to be one segment of the company that drags the rest down. But an opportunity to pick ups a 'side-order' of Warren at an all time low..."Things that make you go hmmmm". And it does seem to be still going lower. This truly does look like a possible purchase for your children's future..
jegan
i have 10k waiting to go with h-d, i made lot's of $$ in past yrs with this co. just have to pick the right share price . i had $10- in mind but maybe i'am to early.??
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