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Govt Trader, Blackstone, and Really Heavy Shoes


Govt Trader, 30yr UST Auction Post-Mortem, here.  Govt Trader auction color, who says no?

Today the treasury sold 13bln 30yr bonds (re-opened the Nov-2043 issue).

After yesterdays fireworks following the weak 10yr auction, tensions were high going into today’s 30yr bond auction.  Going into the auction, the 30yr bond had been outperforming on the curve all day (which is surprising on a 30yr bond auction day).  The belly/front-end of the curve saw decent selling, but the 30yr did not (again, very surprising for a bond auction day).

Matt Levine, Bloomberg, Blackstone Captured More Than All of Hilton’s Increased Value, here.

If you follow all of that, Hilton started with $20.6 billion of debt, reduced it by $5.5 billion and should now have about $15 billion of debt. As in fact it does.And Blackstone put in $5.7 billion day one and added another $819 million in 2010, for a total equity investment of around $6.5 billion.

Today Hilton went public at $20 a share. It’s got 984.6 million shares outstanding, of which750.6 million are owned by Blackstone, giving it a total equity value at the initial public offering price of $19.7 billion, of which Blackstone’s stake is worth $15 billion.So Blackstone made $15 billion minus its $6.5 billion initial investment equals $8.5 billion. On paper, whatever; Blackstone isn’t selling in the offering.

There’s about $724 million of cash on the balance sheet, plus another $1.3 billion from the offering; $19.7 billion of equity plus $15 billion of debt minus $2 billion of cash gives you an enterprise value of around $33 billion. So the enterprise value grew by about $7 billion since the buyout, and Blackstone got more than all of it.

One reason Levine is forever in the Hall of Heroes is that he writes as above but then he can also do this (my emphasis added):

 If you call a customer and ask them to sell you some bonds at 99 on Tuesday, and you buy the bonds and hold them for a bit, and then on Thursday you sell a roughly similar amount of DV01 in different bonds in the same industry to hedge, and then the next week you sell your original bonds at 104 because the market moved, and then you buy a third company’s bonds to keep your credit exposure roughly flat — hahaha you didn’t even finish reading this sentence, did you? Imagine telling it to a jury. 

Tyler Cowen, Marginal Revolution, Trudge rather than Nudge? here.

A Chinese factory worker says walking in huge iron shoes weighing more than 200kg each can cure back pain, but faces hefty competition in his bid to build the country’s heaviest footwear.

“I’ve been walking with iron shoes for seven years,” said Zhang Fuxing, before strapping two crudely welded iron blocks to his feet.

“After they reached 400kg, I felt very proud. Next spring I plan to add 50kg.”

Woman quoted at the end of the newspaper article is the best, however:

“We’ve all worn his iron shoes, it makes your legs feel better,” said Chen Guanghua, a woman in her sixties. “We can’t all play badminton, but anyone can wear shoes.”

She’s like the Chinese Flannery O’Connor.


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