#128: The Worst Buyout for Banks

S2N Spotlight

I have a strange fascination with Elon Musk. I am impressed with his drive, his courage, his vision, and his ability to get stuff done, amongst other positive qualities. On the other hand, I see him as a b.s. artist, a gambler, immature, and a narcissist, amongst other negative qualities.

What caught my eye today was a really interesting article in the WSJ describing how funding Musk’s overpriced purchase of Twitter has become a massive thorn in the side of many of the banks participating in providing finance.

The way investment banks work is that they often take a loan onto their own balance sheet to help facilitate a deal where they earn big fees, and then they sell off the loans in the secondary market. Musk borrowed $13 billion from banks to pay for Twitter at the heavily overvalued price of $44 billion. There were no other bidders; it was a case of Musk having opened his big mouth once too often and then finding himself in a position where he had to actually follow through or face damaging litigation.

The problem for the banks is that the value of Twitter has been written down to $19 billion, the business is bleeding more than the Nile on plague day and there is very little interest in the bonds at par value. So the banks have been sitting on the bonds for the longest period since the financial crisis in 2008/09. They call it in the industry “Hung Deals.”

One of the headlines I saw this morning was Musk saying he was willing to serve in the Trump administration. This is so typical of the guy who loves to dazzle people with the velocity of his spin b.s. I have stated on many occasions that he will end up bankrupt eventually. I am a keen student of history and probability theory. When I read the Musk biography by Ashlee Vance, I was intrigued by the number of times he put everything on the line on very high-stakes, low-probability bets. I haven’t read the Walter Isaacson biography, but I suspect the list of high-stakes bets just increased.

Final comment: There are 7 banks with loans, Morgan Stanley being one of them. It shouldn’t surprise you that Morgan Stanley has consistently maintained a buy rating on Tesla stock.

S2N Observations

Seeing that I am throwing shade on Musk in the spotlight. I have this to say about probably the biggest FX educating scammer in the industry. I won’t mention names but in his video ads he never looks directly at the camera, he speaks leaning back at a side angle. As a self proclaimed expert in body language, it is so obvious that he is being evasive, he cannot even look at the camera straight on. Shifty as, run a mile.

I am so happy I caught this epic milestone on S2N. Gold bars are trading above $1 million per bar for the first time in history. Take a peek lower down in the chart gallery how the US Dollar is getting hammered.

I will end on a sour note, sugar futures are no longer sweet.

Performance Review

Chart Gallery

News Today

The post #128: The Worst Buyout for Banks appeared first on Signal2Noise.