Actually your the one that isn't too smart. Buybacks are for all the reasons mercy posted and then some.
So ARR has no better use of their capital than to buy back shares. Dumb. Real dumb for the shareholders.
Major concerns? I read both articles and my conclusions are.
1. The author is bias and has an agenda. He does not want the buyout with the auto lending company to happen. (He admitted as much in his second article).
2. The author talked about loans made over five years ago in his first article and when called on it he could only find one small loan that he raised questions about.
3. No where does the author show or even suggest that PSEC has poor management, has poor loans, has questionable earnings, or will not continue to be a profitable company. Instead, he chooses to suggest that their integrity is questionable.
The replies and comments to both articles were much more enlightening that the articles themselves, IMO.
In short, the "major concerns raised", IMO, were about the author of the SA articles and his motivations.
headley: this situation has been explained before, PSEC has most of its sources with fixed interest rates and the money it lends is variable, meaning i think that if interest rates go up PSEC will benefit.
peny it makes me sad for u over her in the corner talking about getting your blackrocks off? Please take the anger mgmt class and the meds it could help. Charm school? then come back and try to explain for what the heck you are saying here as it makes zero cents not even a penney? good buy blackrock? what? what ? what does this even mean? PSEC this is PSEC you do know that or not?
I agree totally, no_mercy1.
Seeking Alpha "contributors" get paid for each "read" of one of their stories. I've clicked on attention-grabbing headlines that had little to do with the story a number of times, then I was PO'd that I enabled some bozo to get a larger payment.
Look up the definition of libel, before loosely throwing around terms like "Ponzi scheme.". I think discretion is the better part of valor; especially in view of the fact that Prospect has a team of lawyers on full-time staff. Free speech is well and good, as long as it doesn't cross over into defamation of character.
Hey guys, I think many of you are missing one large part of the problem here, the very recent double top in the tlt, which is putting pressure on all fixed income. MReits, BDCs and bond (corporate and muni) Cefs are getting hit in concert, which no doubt is also attracting fresh shorts to this arena. If rates continue to spike next week, look out BELOW.
Why don't you send a copy of the article to Madoff? He'd be able to tell you if it's a Ponzi Scheme. Sheeeeesh, what a douche.
6) this is deceptive to me and imo the author of the article
7) I believe I have been very succint in my statements and there is no misrepresentation or misinformation in my interpretation of the SA article. You are always able to make decisions of your own but to deny the risks delineated in the article is turning a blind eye that in the past has cost me severely. I was seriously considering buying 30 to 40 thousand shares when it hit my buy point but after this article which is very well documented I have severe apprehension about doing so and as a stockholder if the article and my comments upset you then you need to grow up and find out why you ignore information that should be heeded and refute it or understand it. To not do so could cost you immensely.
Ray I will answer your points one at a time
1) minutia not worth criticism or a reply talking apples and oranges'
2) THEY have not earned their dividend for almost a year and are paying more than they are earning A ponzi scheme was referred to in the article obliquely without mentioning it by name. This is where they have to do 10X as many loans to hide the high rate of bad loans in 2009 and will have to do 10X more loans in 5 yrs "IF" they have the same % of bad loans currently(which i do not believe but could occur in a bad recession again) There is a limit to which you can make high risk loans.
3) that is true but some stocks survive and others dont
4) all those mentioned had excessive by my standards of rates, how do you think they earn enough to pay all administrative costs and other business costs and still pay the stock owners 12%(please dont argue this again). they make high risk loans when I had a business we got letters from these types of loan companies regularly but they are extremely costly. They are in similar business in my mind as pay day loans and car title loans only just a little better. A company that has to use the services at these rates is not qualified to do business at most banks.
5) I assume at some point in your life you had or have a mortgage on your house, if rates go down the mortgage you owe doesnt go up and as a business that borrows from PSEC their loan balance doesnt go up or down because rates change. What someone is willing to pay for them may to some degree but not ever likely more than loan amount due. Usually they would be written down as to risk and possible loss due to high risk nature of loan portfolio This point shows to me your naivite on business as a whole
6) converting loans to equity as you state and then writing it down to zero is not normal business it is a way to disguise bad loans so they can say they dont have any non accrual loans continued on part !!
if they are making more and more loans to hide old loans as the article suggested that would border on a ponzi scheme that when it runs it course could lead to the demise of this company as they can not continue to grow loans at the rate of 10 fold every 5 yrs especially at 15% current rates. When they can no longer cover then all the bad loans will surface that the article suggests that they have represented differently than non accrual but are bad loans to a significant amount at the time they were making them. Now assuredly we went through some difficult times in 2008 that may not show up in current loans but when things go bad a lot of good loans will be bad loans. That is when the #$%$ hits the fan. Now to say they collected dividends when the stock went to 8 and got their money back is not sufficient for a savy investor. to lose earnings power for that long is critical. I think the article is well written with few flaws which is not always true for SA as I have posted before and it is well documented for every item he discusses. IT CAN NOT BE IGNORED EXCEPT AT YOUR OWN PERIL.
" buying back shares is not a good thing."You aren't very smart, are you. Do a bit of research on share buyback and then come back and make the same statement. I won't even give you a hint here.