Welcome to a milestone, the 25th edition of Hybrid Vigor. Thanks for all of your support and encouragement in helping us get here.
Wow. That’s been some bounceback over the last few weeks, accompanied by a VIX retreat to the bottom teens. Doubtless market participants are expecting more of the same, with the last two months of the year being generally favorable, and with conventional wisdom saying that Republicans leading both houses will be good for share prices. We’ll see.
Anyway, it makes sense to look for a modest deluge of new issuance between now and year-end, with most earnings now out of the way, with stocks near all-time highs, with rates heading up in recent weeks and QE over, with bankers wanting greater league-table standings…we could go on.
The convertible market is clearly cheaper than it was when we began publishing in July. The average Ugly 20 HARP has fallen from 11 to just over 9. Still, the average dropped below 8 last month when the world temporarily came to an end. So some caution with the secondary market might be prudent here.
Still, let’s not be too much of a wet blanket. Let’s take a look at some of the big, important new companies participating in the convertible market. We’ve got Yahoo, Twitter, and LinkedIn, just to name a few. Who knows, if I keep rattling my saber, maybe even Netflix and—perish the thought—Facebook will come along for the ride. We’re intrigued by the buzz that Uber may do a billion-dollar pre-IPO convertible. Our asset class makes a lot of sense these days, no matter how jaded we may have become.
I wish you all a good week—and as Sergeant Esterhaus always used to say on Hill Street Blues, hey! Let’s be careful out there.