Readings: As good as cash, Insider buying, Disguised realty discounts
- NY Times: As Good as Cash, Until It’s Not
. . . the $330 billion market for auction-rate notes ground to a halt in mid-February when bids for the securities disappeared. Investors who thought they could sell their holdings easily are now stuck with them. It turns out that the only thing that’s really just as good as cash is, well, cash.
Owners of notes issued by closed-end funds are faring far worse than investors stuck with municipal issues. That’s because the interest rates paid on municipal notes when auctions fail are capped at as much as 12%, much higher than the caps on closed-end fund notes, which are currently around 3.25%.
- Business Standard: Promoters raise shareholding in falling market
Promoters of 54 small- and mid-size firms acquired 8.3 million equity shares of their companies from the secondary market, between January 10 and February 27 this year. In most cases, the shares of their companies are trading at over 30% discount to the all-time high market prices.
Indiabulls Financial Services’ promoters, Sameer Gehlaut and Rajiv Rattan, purchased 1.8 million and 900,000 equity shares, respectively from the secondary market on February 8. The stock fell by 35% from its all-time high of Rs 1,005.25 on December 27, 2007 to Rs 649.95 on February 8.
In a clear sign that the dip in sales is getting to them, at least three developers in Mumbai are offering huge discounts to entice prospective flat buyers. But the discounts are not offered upfront.
“Developers have admitted to us that sales have dropped by as much as 45 per cent. It is a matter of concern for them. Why else would they offer to pay EMIs if they were not worried about the money flow for their projects?”
“As they are flush with funds, developers are able to sustain prices. If they want cash, they drop their prices, sell two or three flats, and jack up their rates again.”
You can avoid ‘official’ price drops for only so long - eventually, the roundabout ways of discounting get reflected in the market prices. See the trend in flat rates in Whitefield (Bangalore).
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March 9th, 2008 at 1:59 pm
why are insiders buying? people are missing something….
March 10th, 2008 at 7:29 am
It’s interesting to see that these insiders are buying more during the recent market turmoil. It would definitely be worth keeping a close eye on these companies, especially if these increases in holding are out of the ordinary.