My Investing Muse

  WeWork Skips $95 Million Interest Payment to Bondholders to Start Debt Talks WSJ article on WeWork missing payment The co-working company says it may make up the missed payment during a 30-day grace period By Ben Glickman on Oct. 2, 2023 5:29 pm ET|WSJ PRO Who is WeWork? (The following section is extracted from their website ) WeWork was founded in 2010 with the vision to create environments where people and companies come together and do their best work. Since opening our first location in New York City, we’ve grown into a global flexible space provider committed to delivering technology-driven flexible solutions, inspiring spaces, and community experiences. Today, we’re constantly reimagining how the workplace can help everyone, from freelancers to Fortune 500s, be more motivated, productive, and connected. Our network 700+ locations globally 39 countries 682,000 physical memberships 70,000 All Access memberships *As of December, 2022 The following is an extract from Wikip...

  (Update as of 04 Apr 2023 - about US default. More details in the following section) Following the various banking issues, there is an interesting thread from Twitter user Mr David Sacks. When the Fed spiked interest rates from ~0 to ~5% over the past year, it had 3 main effects:  1. Undercut value of bonds, especially long-dated bonds.  2. Made lending more expensive, particularly for large purchases like real estate that have to be financed. 3. Increased government borrowing costs.  These effects are just math and have to play out through the financial system. I think they will roughly correspond to the 3 stages of the financial crisis we’re in:  1. Small/regional bank crisis precipitated by unrealized losses on long-dated bonds.  2. Commercial Real Estate (CRE) crisis precipitated by credit markets seizing up for new loans and impairment of existing CRE loan portfolios (which are also unrealized losses).  3. Government debt crisis precipitated by ...

  What is hedging? Fidelity defines the following hedging: Hedging is an advanced risk management strategy that involves buying or selling an investment to potentially help reduce the risk of loss of an existing position. Investopedia has the following definition: Hedging techniques  generally involve the use of financial instruments known as derivatives . Two of the most common derivatives are options and futures. With derivatives, you can develop trading strategies where a loss in one investment is offset by a gain in a derivative. Magolorean states the following as common hedging strategies: There are three common hedging strategies:  diversification, options trading, and futures contracts . Each strategy has its own advantages and disadvantages depending on your individual needs and goals as an investor (Below are some suggestions about hedging when I asked ChatGPT.) Diversification : One of the simplest and most effective ways to hedge a portfolio is through diversif...