My Diary 453 --- 7 Response to Client

Don't worry they aren't mine....! From Paul Quah who has been getting significant kudos for his work on the vulnerable stocks in small cap land... the below was in response to a client query but struck me as really sensible advice/observation.

1. Banking relationships mean zilch, especially if you are small hence bottom of the list of priority customers for the corporate banks, who are trying to minimize risk on their balance sheets.
   
2. Syndicated borrowing mean zilch. Some say this diversifies risk, but I say its like a game of poker. No bank in a syndicate at the moments wants to be the first mover.
   
3. Bond market more efficient than equity market in pricing in risk hands down.
   
4. Do you know if the director’s have pledged their stock to support any personal loans/bonds? If so, a plunging stock price will trigger personal margin calls, which could mean they are forced to sell stock. Not good.
   
5. Companies issuing stock now is a sure sign they are in real trouble given how low the PEs are now, and means no corporate banks will touch them.
   
6. What is the refinancing rate? Check your earnings assumptions post higher cost of debt.
   
7. Debt is not the only issue – what about working capital? There are some companies around with huge working capital requirements. Inclusive in this is trade finance which is also getting more expensive. Cost aside, there is the risk their customers and/or suppliers blow up in this environment. I have documented 7 so far in the last 2 months in HK/China.
   
   
   
   投資從博弈論的角度看
   是動態重複博弈
   不完全信息博弈
   規則特殊的博弈(不必每次都出牌)
   是和其他所有未知數量參與者的博弈
    
   所以沒退出的人永遠都無所謂贏 從這個意義上說他勝利了