Vol. 9, No. 3 621 N.W. 53 rd Street, Suite 400, Boca Raton, FL 33487, www.hegcap.com March 1, 2009
Available By Paid Subscription Only Copyright 2009 The HCM Market Letter, LLC All Rights Reserved Reality Bites
"So long as risk is effectively concealed from borrowers and lenders or
actually shifted to others, risk-taking will be excessive. The initial
phase of excessive risk-taking will manifest itself as an economic
boom, but eventually, when actual losses begin to change the
perceptions of borrowers and lenders and begin to impinge upon
unsuspecting others, the boom will give way to a bust….[A] market
system whose credit markets involve risks that are partially concealed
from the lender and partially shifted to others will be biased in the
direction of excessive risk-taking. And excessive risks are converted in
time into excessive losses."
Roger Garrison 1
The problem with bailouts is that you have to know what you're bailing out. But neither
the U.S. government nor anybody else is capable of estimating the ultimate cost of bailing out
such corporate giants as Citigroup, AIG, General Motors, Fannie Mae, and Freddie Mac (and the
list goes on). There are two reasons for this. First, on a stand-alone basis, these companies are
opaque and indecipherable entities. Financial innovation left transparency in the dust. Wall
Street devoted much of its intellectual and political capital to concealing the risks it was creating.
This concealment was deliberate; products needed to be priced inefficiently to produce profits.
Second, these companies are integral parts of a networked global economy; as such, their value is
completely dependent on the overall health of that network. Unless the network can be
restored to health, these assets will remain severely devalued. Right now, the network is very
sick. When a system is allowed to hide risk for so long, it is ill-equipped to manage that risk
when it finally emerges from the shadows.
The Economic Policy Conundrum
The Obama Administration is facing a near-impossible task trying to bail the U.S.
economy out of the muck of years of ill-begotten economic policies. The biggest challenge
facing policymakers is not short-term recovery, however. Eventually, stimulus is likely to arrest
the forces of economic collapse and stabilize matters - at least temporarily. But the real problem
is sowing the seeds of long-term, sustainable, organic economic growth. This is really the crux of
the policy challenge. The United States in the midst of the worst economic downturn in 80 years
as the result of a panoply of extremely poor economic policy choices. Economist Roger W.
Garrison draws an important distinction between "healthy economic growth, which is saving-induced
(and hence sustainable), and artificial booms, which are policy-induced (and hence
unsustainable)." 2 In other words, monetary policy that kept interest rates low for an extended
period of time, tax policy that favored debt over equity, regulatory policy that allowed financial
institutions to operate opaquely, and social policy that pushed home ownership regardless of
affordability, all combined to create artificial economic demand that could only be financed with
debt because the savings (i.e. equity) to purchase them did not exist.
Moreover, as more and more debt was created through financial engineering and policy
prescription, the prices of these were bid up higher and higher. This led these products to become
grossly inflated in value compared to any inherent economic worth they might possess. Once the
bubble burst, their value dropped precipitously. Unfortunately, the face amount of the debt used
to purchase these assets did not adjust downward at the same time. Assets that were purchased at
inflated prices are now worth a fraction of what they were purchased for, leaving behind a serious
dilemma for the owners of these assets and their creditors.
Following conventional economic thinking, the government believes that the solution lies
in policies designed to reflate the value of these assets. The problem with this approach is that it
is based on the incurrence of trillions of dollars of additional debt to create the demand needed to
purchase these assets. Debt begetting more debt is a poor prescription for sustainable long-term
economic growth. At best the government may be able to provide a short-term boost to the
economy, but what the economy really needs is a solid, organic foundation for growth. Debt-financed
government demand can't be sustained indefinitely, which is why this policy is doomed
to fail in the long run. The U.S. balance sheet is not a bottomless pit, although it is increasingly
coming to resemble a Black Hole. At some point, the economy will have to generate sufficient
tax revenue to pay for this government spending or the country will lose its AAA rating and
ultimately become a troubled credit. Economic demand will ultimately have to become savings-driven
or it will again collapse.
This does not necessarily mean that the government should walk away from creating
short-term demand, but it should be extremely circumspect in how it does so. This is where
political reality collides with economic reality. The optimum long-term economic solution would
be to allow the economy to hit bottom and then begin to rebuild demand naturally. But such a
scenario would likely entail an unemployment rate on the order of 15 or 20 percent and an even
worse human toll than is already being exacted by the downturn. But it would give the economy
an organic base from which to rebuild. The government's job in such a scenario would be to
provide the right kind of safety net (not only of financial support but also job and educational
training) to see the citizenry through the crisis. What the U.S. really needs is an economic
Marshall Plan to rebuild itself, with all of the sacrifice and public service that would entail.
Apparently, that is asking too much in today's me-first society. Accordingly, the government
finds itself compelled to follow policies that may or may not create unsustainable short-term
growth and will have to be carefully targeted to promote sustainable long-term growth.
There is a profound difference between healthy, sustainable demand and unhealthy,
unsustainable demand, just as we are living the unhappy lesson that there is a great difference
between healthy economic activity (i.e. activity that contributes to the productive capacity of the
economy) and unhealthy economic activity (i.e. speculative trading and corporate finance
transactions). Propping up bad banks through a "good bank/bad bank" model would simply
direct funds to the sustenance of past unhealthy economic activity. Starting a new Economic
Reconstruction Bank, as HCM has recommended, could make loans available for new productive
projects and direct funds into healthy long-term economic activity.
Another bout of policy-induced growth will not only repeat the mistakes of the past, but
leave the economy even weaker, teetering on an unstable foundation of government support that
cannot be sustained indefinitely without impairing America's balance sheet, credit rating, and
ultimately its geopolitical might. Whether America's short-term political orientation can ever
address this conundrum is the greatest question facing policymakers today. HCM has no
hesitation in saying that much of what the government has proposed thus far to deal with the
crisis won't come close to dealing with the long-term issue of creating savings-induced or organic
growth. This means that any near-term relief (i.e. relief that occurs within the next five years) is
most likely to give way to years of below trend growth because the economy will be lacking the
organic foundation of growth it needs.
Dow 5000 Update
Year-to-date through February 27, the S&P 500 was down 18.62 percent and the Dow
Jones Industrial Average was down 19.52 percent. Moreover, strategists and investors are
increasingly coming around to the conclusion that corporate earnings are going to be nothing
short of horrendous this year and that stocks are headed even lower, as HCM has been arguing for
months (without pleasure, we hasten to add). Very recently, three of the smartest forecasters on
Wall Street sharply lowered their earnings forecasts for the S&P 500.
- On February 13, David Rosenberg, Bank of America's North American
Economist, recently reduced his 2009 and 2010 S&P 500 operating EPS forecast
to $46 (from $56) and $55.50 (from $63), respectively.i Mr. Rosenberg is now
forecasting an S&P 500 low of 666 based on a 12x multiple of forward (i.e.
2010) earnings.
- Francois Trahan of ISI Group dropped his S&P 500 earnings forecast from $60
to $45 on February 23. Mr. Trahan used a 13x multiple to forecast a potential
- On February 26, Goldman Sachs' David Kostin dropped his 2009 and 2010 S&P
500 operating EPS forecast to $40 and $63, respectively, after deducting $23 and
$8, respectively, for provisions and write-downs. Mr. Kostin uses a 13.2x
multiple of 2010 earnings (pre-write-downs and provisions) to come up with a
year-end 2009 S&P 500 target of 940.
These sharply lower forecasts are consistent with HCM's dim view of corporate earnings, but we
believe that all three analysts are clinging to overly optimistic earnings multiples in predicting
ultimate stock market lows. At this point, there is clearly a growing Wall Street consensus that
S&P 500 earnings will come in well below $50 in 2009 and that the correct multiple on these
earnings should be in the 12-13x range. HCM continues to believe that the multiple should be
lower based on the fact that (a) we are in a debt deflationary spiral, and (b) government yields are
artificially depressed and signal economic distress and do not signal an attractive investment
alternative, and corporate yields are extremely high and offer real competition for investor funds.
Last November, HCM set 2009 price targets of 5000 on the Dow Jones Industrial
Average (DJIA) and 475 on the S&P 500 based on applying a 7x multiple to Goldman Sachs'
then 2009 S&P 500 earnings estimate of $65. (See The HCM Market Letter, Nov. 15, 2008,
"Dow 5000") At the time, the S&P 500 was at about 850 and the DJIA was at about 8600. Our
low multiple was based on our view that an environment characterized by debt deflation deserves
a 6-8x multiple. Now that Mr. Kostin and others have lowered their multiple, it is only fair to
raise the question whether we should be further lowering our target prices on these equity indices
at this time based on applying our multiple to a lower earnings number.
For the moment, the market remains far above our previous targets. Our targets are
intended to be directional in nature and we see no reason to lower them further at the current
time. We have made our point, which is that the stock market is likely to head sharply lower in
the months ahead. Moreover, the earnings estimates have been lowered primarily based on
expectations for further write-offs by financial companies (and non-financial companies that
wandered into the financial space). Investors may treat these write-offs and provisions as non-recurring
items and look to higher recurring S&P 500 earnings in pricing the market. While we
continue to believe that the multiple should be in the single digits, the correct recurring earnings
number remains a moving target. Accordingly, at this time it would be premature to lower our
estimate further. Needless to say, we remain extremely comfortable with our prior estimates of
475 on the S&P 500 and 5000 on the DJIA.
A bear market rally is possible at any time. Investors should be aware that as the market
moves lower, rallies have the potential to be extremely sharp since they are starting from
compressed levels. Such rallies should be used to reduce overall equity exposure. That does not
mean that equities should be abandoned totally. There are a number of stocks that are trading at
well below book value (even taking into account the declining transfer value of their assets) that
may be worth buying in the months ahead. The debt of these companies, which HCM is
particularly active in, is even more compelling as an investment. But investors need to identify
longer term changes in market behavior and the economic environment before becoming bullish
again on stocks. Right now, there are no such signs, such as better employment, housing or GDP
numbers, or tightening credit spreads, or improving market technicals. HCM is starting to sense
that the forces of denial, as potent as they are, are starting to weaken. Accordingly, investors
should structure their portfolios for further equity declines.
The "D" Word
The fourth quarter GDP loss of 6.2 percent (did anybody really believe the 3.8 percent
estimate?) illustrates just how deep a hole our economy has to climb out of. The economy fell
into this hole almost literally overnight, but it's going to take much longer to climb out. A quick
recovery is out of the question. HCM expects first quarter GDP to be in the -6.0 to -7.0 percent
range based on our reading of employment, housing and other economic data as well as the data
we are seeing from the 200 or so companies in our portfolios across a wide variety of industries.
Moreover, based on our view that the stimulus plan will be largely ineffective this year and that
more large-scale business failures are in the works (many of them slow-motion car wrecks), we
do not expect to see positive economic growth until sometime in mid-to-late 2010 (and then only
modest growth).
Investors expecting a conventional bear market/bull market cycle are likely to be sorely
disappointed. Over the past several decades, U.S. stock market investors have been conditioned
to believe that the market will bottom and then rebound. Bear markets have been brief within the
context of a long bull market that stretches back to the 1980s. But the current environment is
likely going to be different. We are now experiencing a destruction of wealth on a scale that is
both unprecedented and permanent because much of that wealth was built on a fragile foundation
of debt; in reality, much of that wealth didn't really exist in the first place. As a result, what
people believed to be economically valuable and stable was in fact nothing of the kind. In many
respects, the latter stages of the bull market were little more than an illusion. Real corporate
earnings and genuine productivity peaked years ago, and the economy has been operating on
debt-induced fumes for years.
Accordingly, investors need to prepare themselves for a future that will not resemble the
recent past. Ray Dalio, the wise man who runs Bridgewater Associates, noted in a recent
Barron's interview that investors need to recognize that the current environment more resembles
a depression than a recession: "Everybody should, at this point, try to understand the depression
process by reading about the Great Depression or the Latin American debt crisis of the Japanese
experience so that it becomes part of their frame of reference. Most people didn't live through
any of those experiences, and what they have gotten used to is the recession dynamic, and so they
are quick to presume the recession dynamic. It is very clear to me that we are in a D-process."
(Barron's, February 9, 2009, "Recession? No, It's a D-process, and It Will Be Long," pp. 38-40.)
Mr. Dalio's view is consistent with HCM's long-argued view that we are in a debt-deflationary
spiral whose end is nowhere in sight.
The characteristics of our current economic situation are as follows:
- Interest rates have dropped to zero.
- Bank stocks have plunged by 90 percent or more.
- The Federal Reserve's balance sheet has exploded.
- Credit spreads have widened to historic levels.
- The economy is seeing massive asset deflation.
- Debt is being destroyed in record amounts.
- Unemployment is increasing each month.
- The financial industry is shrinking radically.
- Manufacturing activity has slowed sharply.
This is not a situation that is consistent with recent American experience. HCM has previously
described a depression as an economic condition in which traditional monetary and fiscal policy
is rendered ineffective. For the moment, we are deeply entrenched in such a situation. The
question is how long the economy will remain depressed before some of the remedies that have
been proposed start to work. Unfortunately, HCM fears we may be in for an extended stay.
For these reasons, HCM believes that after the stock market bottoms, it will drift along at
a depressed level for an extended period of time. The American economy will experience less-than-
trend growth for a similarly prolonged period of time. The economy will have to absorb
trillions of dollars of bad debts and transition its resources away from speculative activities and
toward new productive endeavors. The economy has to be completely retooled, and this process
will not happen overnight, particularly because such a program must be directed by a highly
inefficient democratic political system that is inefficient in reaching consensus about its goals and
how to achieve them. Unfortunately, the deeper involvement of the government in the financial
and other sectors of the economy is likely to stifle growth, innovation and creativity and further
contribute to lower growth for years to come.
Investing Today
This by no means is intended to suggest that investors will be unable to make money. It
does suggest, though, that the era of bull market geniuses is probably over. Too many were paid
too much for doing too little over the past several decades. Being at the right place at the right
time is not going to cut it anymore. But as the debt destruction process plays out, new investment
opportunities will arise in the capital structures of restructured and surviving companies.
As investors go about reallocating money to new opportunities, they may want to keep in
mind something that HCM recently read in The Economist.
"Over the past 35 years it has seemed as if everyone in finance has
wanted to be someone else. Hedge funds and private equity wanted to
be as cool as a dotcom. Goldman Sachs wanted to be as smart as a
hedge fund. The other investment banks wanted to be as profitable as
Goldman Sachs. America's retail banks wanted to be as cutting-edge
as investment banks. And European banks wanted to be as aggressive
as American banks. They all ended up wishing they could be back
precisely where they started." (The Economist, "A special report on the
future of finance," January 24, 2009, p. 17.)
There are a limited number of investment opportunities that make sense in today's market, and
there are a limited number of managers qualified to execute those strategies. Unfortunately,
managers in out-of-favor or discredited strategies are now trying to reinvent themselves as
managers of the few in-favor strategies in which they have limited or no experience. HCM is
seeing this occur in the corporate credit space, where firms that have previously operated in areas
peripheral to the credit markets such as private equity or mortgages are suddenly touting their
expertise in corporate credit. These managers are wading into uncharted territory. Investors must
insure that managers possess the expertise that is required for the strategies for which they are
being hired. They have already experienced the disastrous results of private equity firms thinking
that doing deals would prepare them for investing in bank loans.
Bank Nationalization
We are quickly learning the flaws of the half-baked approach to supporting the nation's
banks that the Bush Administration adopted and the Obama Administration seems hell-bent on
continuing. At least the Bush Administration had an excuse - the former Treasury Secretary was
a career investment banker who saw the world through the eyes of Wall Street. Perhaps HCM
was naïve in hoping that the new Treasury Secretary, having been a career regulator who viewed
matters through the opposite end of the glass, would see things differently. We probably should
have known better since Mr. Geithner participated in the Bush Administration's bailout. But the
quasi-nationalization approach is clearly a disaster for all concerned (the recent article describing
the hall of mirrors that used to be Citigroup is a case in point - see The Wall Street Journal,
February 25, 2009, "Citigroup Chafes Under U.S. Overseers," p. A1.) There seems to be little
disagreement that two of the country's major banks - Citigroup and Bank of America - are in the
zone of insolvency. Their assets are worth less than their liabilities and their shareholders have
been wiped out in all but name (and in the little drill-bits of stock that trade publicly as make-believe
options on their long-term recovery). But the system can't seem to bring itself to admit
that these banks have been effectively nationalized in all but name and that taking the final step of
nationalizing them is in many respects just a matter of form over substance. The only thing worse
than a banking system that has been privatized is one that has collapsed, but that is the choice we
are faced with. The Rubicon has been crossed and we need to clear away tons of debris that are
clogging up the river before we can cross back to the other side.
Moreover, maintaining the illusion of public ownership has enabled some of the
individuals running these institutions to engage in some of the most irresponsible behavior ever
seen in the history of American business. HCM is speaking specifically of the pay-out of billions
of dollars of bonuses to the executives and employees of Merrill Lynch on the eve of its forced
takeover by Bank of America. This act, which Bank of America's Chairman Ken Lewis claims
he was powerless to stop (HCM does not believe him) and former Merrill Lynch Chairman John
Thain, in what can only charitably be described as a gross breach of conscience and good
judgment, somehow sanctioned, are prima facie evidence that the hybrid public/private TARP
model is totally untenable and should be shelved immediately. Those banks that can repay the
TARP money (or produce a believable plan to do so within three years) should be permitted to do
so forthwith, and those that are teetering on the brink of insolvency should be nationalized.
Otherwise, the managements of these firms are going to pay more attention to figuring out how to
game government compensation limitations than maximizing the value of their troubled assets
over the next several years. HCM never thought we would say that there are worse things than
nationalization, but there are and we saw them when billions of dollars was paid out to the people
who lost even more billions of dollars at Merrill Lynch. This has to have been one of the most
brazen thefts in American history.
Let GM Go
General Motors has been insolvent for years. Yet political expediency has prevented
recognition of this harsh truth. The company's unions have blocked efforts to bring the
company's cost structure into line with changing economic realities. Michigan's powerful
Congressional delegation has blocked efforts to improve American automobiles' fuel efficiency,
creating an opening for foreign manufacturers with lower cost structures to steal the hearts and
minds and pocketbooks of American consumers. Years of bad choices have now left the U.S.
government with a terrible choice - whether to give GM billions of dollars of money inside or
outside of bankruptcy. The correct decision, as unpalatable as it may be, is painfully obvious.
All of the king's horses and all of the king's men are not going to be able put GM back together
again. It is time to let this American icon declare bankruptcy in order to maximize the chances of
salvaging something out of this American tragedy.
GM is still paying or accruing billions of dollars of annual interest payments on the
company's more than $40 billion of debt. The company is negotiating with holders of $27.5
billion of this debt, which is unsecured, to reduce it to $9.2 billion (by exchanging stock for
bonds). Yet all of this debt and stock is worthless. Instead of wasting time haggling with debt
holders over exchanging a portion of their worthless claims for worthless stock, the company
should declare bankruptcy so these claims can be wiped out. GM's ability to meet the
government's February 17 deadline was delayed by its inability to come to an agreement its
bondholders. The bondholders are institutional investors who believe they are exercising their
fiduciary duty to their beneficiaries by trying to squeeze the best deal possible out of the
automaker. But the sad reality is that they made a bad investment and should suffer the
consequences. We need to stop trying to save everyone from the consequences of their errors or
else they will keep making them.
The unions are also trying to salvage an ownership stake out of this mess. The company
is negotiating to exchange half of approximately $20 billion of Voluntary Employee Benefit
Association (VEBA) obligations into equity. Unfortunately, 100% of the VEBA obligations are
likely worthless since GM will never be able to pay them. The VEBA was part of the bargain
that the unions made with GM over the years. Workers gained generous wages, benefits and
work rules that rendered the company uncompetitive. This was not a secret - the company's loss
of market share and weakening financial position was apparent for years to the unions as well as
to everyone else. The unions won the bargain but they lost the war. The company doesn't owe
the workers anything more than what can be granted in bankruptcy, which is likely a meaningful
equity stake in exchange for the VEBA and the billions of dollars of other healthcare and pension
obligations owed to current and retired workers. This is undoubtedly a tragedy of enormous
human dimensions, but responsibility for it is shared by all Americans who sat by while their
politicians and business leaders allowed GM to sink into insolvency. Accordingly, America owes
the workers a safety net when they lose their jobs and benefits. But this should be the same
safety net society owes all of its displaced workers, not a special one for former GM workers.
Allowing GM to file for bankruptcy will be a blow to the American psyche. But GM has
already gone bankrupt in all but name. In suggesting that it will require $125 billion in financing
to undergo a bankruptcy, the company may be playing chicken with Congress but is more likely
indicating just what a Black Hole of liabilities it has become over the decades. America must
have the courage to deal with this reality. Bankruptcy will give the company, and the country, an
ability to make the hard decisions that it refused to make before. Either way, GM's failure is
going to cost taxpayers tens of billions of dollars. But until we are willing to be honest about our
failures, we are never going to put ourselves in a position to avoid future ones.
Obama's Budget
President Obama's is in many respects a dramatic break with the past, although in many
respects it falls short of the type of radical tax and other changes that are really needed (but may
simply not be politically feasible). We just hope that Mr. Obama's reach does not exceed his
grasp. Many things may have changed economically in recent years, but one thing has not: a
country can't tax and spend its way into prosperity. Moreover, we are confident that the growth
rate assumptions used in years 2, 3 and 4 of our new president's proposed budget are unrealistic.
The economy is unlikely to grow at anything close to 3 to 4 percent in those years, and relying on
that much growth to close the budget deficit by the end of Mr. Obama's first term will only lead
to disappointment. This economy, which shrunk at an annual rate of 6.2 percent in the fourth
quarter of 2008 and will almost certainly not show any growth at all in 2009, is not going to
magically spring back to life in 2010. Mr. Obama is setting himself up for failure with these
projections.
HCM was very happy to see that the Administration is prepared to rid the tax code of the
egregious treatment of private equity carried interests, which we have recommended before (see
The HCM Market Letter, April 1, 2008, "How to Fix It"). Now that private equity has become a
loss-leader for its partners, we would caution those drafting the legislation to make sure that
private equity does not gain an unintentional windfall from this legislation. This could occur if
private equity partners were permitted to deduct claw-back payments (i.e. repayments of carried
interests earned early in a partnership based on losses incurred later in a partnership) at the new
higher tax rate if they were taxed on those original payments at the lower rate. In order to prevent
such a benefit, if the original payment was taxed at 15 percent, repayment of that money should
only give rise to a deduction at 15 percent, not the higher ordinary income tax rate.
We think limitations on charitable deductions are poor public policy. The argument that
wealthier people should not receive a greater dollar-for-dollar benefit for charitable deductions
than less affluent people is a red herring, particularly in view of the fact that the Alternative
Minimum Tax already haircuts high earners' charitable gifts. We also believe that limitations on
mortgage deductions would be better handled by limiting deductions for mortgages over a certain
dollar amount rather than by income; such a methodology would be more effective in fighting
housing speculation.
We are opposed to raising taxes on capital, but we also recognize that we are in a fiscal
emergency and that raising the capital gains tax from 15 percent to 20 percent on the wealthiest
Americans would not impose undue hardship and would keep the rate relatively low. We would
prefer to see capital gains rates implemented on a graduated scale based on the amount of capital
gains reported in a single year. Someone who earns an especially large gain could certainly
afford to pay a little more in tax. We commend the plan for maintaining the 15 percent tax rate
on dividends, which should not be taxed at all since they are already taxed at the corporate level
and remain an extremely inefficient means of returning capital to shareholders.
The biggest problem with the budget - and with any budget, not just Mr. Obama's - is
that the government just wastes so much stinking money. The reason people find higher taxes
abhorrent is not because they don't want to help those less fortunate than themselves, or fund
necessary government programs, but because they don't want their money to be treated like
Congress's personal piggy bank. We would love to see the list of the $2 trillion of wasteful
programs that Mr. Obama claimed his team has already identified for elimination. The amount of
government waste is truly mindboggling, and Mr. Obama must insist on spending discipline if he
is to have any chance to keep the budget deficit from exploding over the next four years.
The Coming Meltdown in Eastern Europe
By all accounts, the former Eastern Bloc countries that so successfully navigated their
entry into world capitalism after the fall of communism have borrowed themselves into near
oblivion and are about to inflict frightening losses on their own banks and Western European
banks, their main aiders and abettors. Our good friend John Mauldin has been out front on this
story, which has enormous implications for the global financial system. The ever prescient Christopher Wood has also been warning about an Asian-style banking crisis in the region, with
serious ramifications for the Western European banks that loaned these institutions by some
reports trillions of dollars. This is a story that needs to be followed in the coming weeks because
it will have major negative consequences for world financial markets. To state the obvious, this
is the last thing the world economy needs to deal with right now.
Michael E. Lewitt
mlewitt@harchcapital.com
1 Roger W. Garrison, Time and Money The Macroeconomic of Capital Structure (New York: Routledge,
2001), pp 111, 120.
2 Garrison, p.56
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