Aer Lingus sees pension deficits increase as 'lenghly' lawsuits loom

Pension Plans continue to see diminishing returns. Aivars Lode

IRELAND – Aer Lingus has seen deficits in both of its domestic defined benefit funds increase over the last six months as it once again rejected calls to eradicate the shortfall through additional contributions.

In its half-yearly results, released today, the former state-owned Irish flag carrier noted the strike action threatened by unions over the situation, but said that it would continue its negotiations with the Labour Relations Commission.

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The report said there had been no change in the "risks and uncertainties" of the pension arrangements since it released figures for the end of 2011, at which point the multi-employer Irish Airlines Superannuation Scheme (IASS) reported a €700m deficit.

"The group’s position remains that it has no responsibility for the funding shortfall in the Irish Airlines Superannuation Scheme or the Irish Airline Pilot Pension Scheme," the company reiterated.

However, figures from the end of June showed that the IASS deficit had risen by €27m to €727m under the country's minimum funding standard, with the country saying around two-thirds of the shortfall stemmed from its own employees.

According to the report, the pilot's pension scheme had also seen its deficit increase, albeit less noticeably, by €2m from October last year to €172m.

The company warned that lack of deficit reduction payments on its part could be subject to a legal challenge "on various grounds from various potential claimants".

"Any such challenge would be strenuously defended," Aer Lingus said. "Lengthy litigation could ensue. If, contrary to the firm legal advice that the Group has received (that such a challenge is unlikely to succeed), a Court were to find against the Group in any such litigation, significant or very significant loss could arise."

The Irish government has previously ruled out state aid to support the IASS funding shortfall, while one of its largest shareholders, rival airline Ryanair, has threatened a lawsuit if it addresses the deficit, contradicting agreements that the airline should not increase contributions or make any attempts to help the scheme back to full funding.

Author: Jonathan Williams

Bigger Ticks for Smaller Stocks Get Warm Reception

From Ted. Aivars Lode

Industry players are encouraged by new legislation that authorizes the Securities and Exchange Commission to increase the minimum trading increment for stocks of certain small companies.

Under the Jumpstart Our Business Startups (JOBS) Act, Congress directed the SEC to examine the impact of decimalization on liquidity in small and middle capitalization companies as well as any impact on the number of initial public offerings. Congress is worried that penny ticks have led to less liquidity in smaller companies. That, in turn, has led to a drop-off in new listings and, consequently, fewer jobs from startups.

Once the SEC has completed its study, the Act authorizes the regulator to designate a larger tick size-between 2 cents and 9 cents-for the stocks of so-called "emerging growth companies." As defined by the JOBS Act, these are companies with revenues of less than $1 billion that have been public for less than 5 years.

"Before decimalization you had wider spreads and more size," said Patrick Healy, a principal at the Issuer Advisory Group, and a former executive with New York Stock Exchange specialists Bear Wagner. "The concept of a nickel or dime minimum tick for less liquid stocks is a no-brainer."

Industry players like Healy believe that a larger tick size will encourage quoting in size by market makers. The firms will make more money, which will allow them to spend more on research. More published research will confer greater visibility on the stock. With more research and greater size in the quote the stocks will become more attractive to investors.

"If you set the tick wide enough and there is enough profit incentive for middlemen to come in to make markets, then those middlemen will have an economic incentive to write research," Jeffrey Solomon, chief executive officer at investment bank Cowen and Co., told members of the House Financial Services Committee at a hearing last month.

Actually, with a market capitalization of about $300 million, the stock of Cowen Group, parent company of Cowen and Co., fits the definition of a small-cap company. It is followed by only two analysts and trades about 300,000 shares per day.

Assuming a single dealer controlled all trading in the stock, its one-cent spread would only generate $3,000 a day in profits, Solomon told the committee. "Why write research when they don't have much incentive to do so?" he asked. "It's a big issue."

Tom Joyce, chief executive of Knight Capital Group, seconded Solomon. A former senior trading executive at Merrill Lynch, Joyce told the committee: "At Merrill, we only made markets in names in which we had research coverage. So there are many firms out there that will tie research coverage to market making."

The industry moved to decimalization in stages during 2000 and 2001. The one-cent tick gradually replaced the then minimum increment of 6 1/4 cents. Spreads quickly followed suit, collapsing from 6.25 cents to a penny. The relatively tiny spread slashed dealer profits. Since then, the number of Nasdaq-registered market making firms has dropped from over 500 to about 125.

Despite the sharp drop in spreads, evidence of a comparable drop in quoted size is lacking. Quoted size prior to decimalization for less active securities ranged from 4,600 shares to 6,600 shares, counting both bid and ask shares, according to studies done post-decimalization by the Federal Reserve Bank of Chicago and various academics.

In recent years, comparable figures are actually greater, according to data supplied by Knight Capital Group for a 2010 study conducted by a trio of academics titled "Equity Trading in the 21st Century." The data shows quoted depth in October 2009 in the Russell 2000 index stocks lying within six cents of the market's best quotes is approximately 7,000 or 8,000 shares. Again, that is the average of all shares at both the bid and the offer.

"The paper shows posted liquidity has, in fact, risen," Larry Harris, one of the study's authors and a professor of finance and business economics at the University of Southern California, told Traders Magazine. "There is no indication we have a big problem."

Even if tick sizes were increased for small-cap stocks, there is no guarantee the move would accrue to the benefit of investment banks or issuers, sources say. Harris notes that the business of market making has largely been taken over by extremely efficient high frequency and medium frequency trading houses.

"Those dealers don't even exist anymore," Harris, a former SEC economist, said. "And they won't exist with wider spreads either. They've been displaced by electronic traders who are orders of magnitude more efficient and disciplined."

Still others argue that while increasing spreads will likely lead to more posted size, it will not necessarily lead to more trading. That's because the cost of trading goes up. "The wider the spread, the more size up on the spread," noted Dan Mathisson, Credit Suisse's head of equity trading for the Americas. "But the flip side to that is the customer will spend more in crossing the spread. So, it's not that simple. What the regulators need to be concerned about is 'does the investor end up, on average, with a better or worse price?'"

One investor suggests the additional liquidity may be worth it. Kevin Cronin, global head of equity trading for Invesco, testified at last month's hearing on behalf of the Investment Company Institute. He told the committee: "One of the things we look at when we invest in companies is liquidity. So we are supportive of participating in a pilot program with traditional tick sizes being moved from a penny to five cents or more." 

Infrastructure debt funds get strong support

This is what we are creating in Software. Aivars Lode

27 June 2012

The number of unlisted infrastructure debt funds has nearly doubled since 2010, boosted by surging demand from institutional investors.

According to a survey by Preqin, the number of funds has jumped from 27 in the fourth quarter of 2010 to 46 in June this year.

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The increase comes at a time when institutional investors have become increasingly aware of the benefits of using a wide range of infrastructure instruments, the company said.

It said more than 130 institutional investors in its survey had either previously committed to an unlisted infrastructure debt fund or would consider doing so in future.

"As with any new or emerging strategy," it added, "institutional investors are likely to be cautious when committing capital to infrastructure debt funds, although more investors are becoming attuned to the benefits of utilising various strategies to access the infrastructure market."

Andrew Jones, managing director for infrastructure debt at AMP Capital Investors, explained in the Preqin research that his company had noticed an increasing "acceptance and recognition" of an infrastructure debt allocation over the last 18 months.

He attributed this trend to investors becoming more risk averse and placing a greater emphasis on portfolio security.

"Suddenly, investors that were looking for 15%-plus out of an infrastructure portfolio are seeing space in their allocation strategy for a consistent 10% yield with lower risk – something they can rely upon in terms of liquidity and capital stability," he said.

Preqin said it expected interest in infrastructure debt funds to grow even further, as investors were increasingly attracted to more predictable yields with lower risk/return profiles.

It acknowledged, however, that the market would remain a niche one, pointing out that only a select few fund managers were active in the debt space.

Small Fish Burned in Facebook IPO Knew Better

By William Cohan

You know that the hand-wringing over the almost 25 percent drop in the value of Facebook’s Inc.’s stock since its May 17 IPO has reached a new level of disproportion when ABC’s “Good Morning America” weighs in with the idea that maybe Mark Zuckerberg should abandon his honeymoon and return to Silicon Valley to somehow make things better for the gullible investors who got singed.

Lots of reasons have been posited for the Facebook IPO “debacle” -- as the news media like to describe it -- including that perhaps Zuckerberg, the company’s founder and chief executive officer, and his management team failed to disclose declining quarterly advertising revenue in a timely way. Or that Nasdaq OMX Group Inc. failed to process initial purchase and sale orders properly on IPO day. Or that some underwriters passed “quiet guidance” to big, institutional investors about Facebook’s financial prospects but not to smaller investors. Or that technical “trading glitches” caused the problem. Or that Morgan Stanley (MS), Facebook’s lead underwriter, botched the whole IPO process.

The Diepersloots

Burned investors will grasp at anything -- except their own role in fueling Wall Street’s Facebook IPO hype machine -- in an effort to recoup some of the billions of dollars they have lost as the stock continues to slide. On May 23, the plaintiff’s bar got into the act by filing three separate shareholders lawsuits accusing Facebook’s management, board and underwriters of failing to provide material information about the company’s second-quarter financial performance to small investors during the roadshow, while providing the same information to some institutional investors. This, the suits claim, caused the small investors to lose more than $2.5 billion after Facebook’s IPO.

The New York Times managed to find Robert Diepersloot, a dairy farmer in Madera, California, who said the Facebook IPO “confirmed all the fears and suspicions” that led him and his wife to take all of their savings -- in the tens of thousands of dollars -- out of the stock market and invest it, instead, in real estate. (Good luck with that Mr. Diepersloot.) “We just pulled out completely,” he told the paper. “We’ve lost trust in the whole scenario.”

OK, once and for all: When will small investors finally get the message that investing in IPOs is a fool’s game and that yet again they served as mere grist for Wall Street’s IPO selling machine? The current IPO market -- controlled by Wall Street’s cartel of five or six leading firms -- exists only to benefit three groups of constituents.

Foremost are the Wall Street banks themselves, which reap hundreds of millions in fees from the IPOs whether the resulting stock price goes up or down. Either way, Wall Street makes money.

The second group consists of Wall Street’s big institutional trading partners -- the ones that provide banks with huge fees every day of the week, whether or not there is an IPO to be hyped and priced. For obvious reasons, Wall Street wants to keep these big investors happy. That is why they are sometimes given (inside) information about a company that small investors are not given -- as has been alleged in the Facebook shareholder lawsuits. IPOs are priced to put money in these big shareholders’ pockets, either by underpricing the company in the first place so that it “pops” when it begins trading, allowing the institutional shareholders to flip the stock quickly after it rises in early trading, or by giving them information that will allow them to get out fast while smaller investors are getting in.

Lowest Priority

Third on the list of priorities is the company being taken public. The Wall Street underwriters strive to get just enough value in the IPO to keep the company’s management and early investors happy, while also leaving enough on the table so institutional investors get their “pop.” Wall Street wants its IPO clients to stick around for the longer term, so that additional fees can be generated from future secondary offerings, as well as future debt offerings, mergers and wealth management services. Wall Street is engaged in a delicate balancing act between its fee interests and those of its institutional trading partners and its corporate-finance clients.

You’ll notice, of course, that small investors don’t make the list of important constituents. Their concerns are nearly irrelevant to the Wall Street cartel, despite the marketing dollars that big firms often invest in attracting small investors to their brokerage businesses. Not that banks hate small investors -- they generate fees (through churning those brokerage accounts) and they provide liquidity to the market -- for example, in the form of misplaced demand for IPOs. But Wall Street sees little point in keeping them informed or helping them make wise decisions.

That Facebook’s IPO would be a product of the Wall Street hype machine was obvious from the beginning. For at least the past 18 months -- starting perhaps with the January 2011 investment by Goldman Sachs Group Inc. (GS) into the company that valued it at $50 billion -- Facebook has been awarded one ridiculous valuation milestone after another.

It’s easy to blame Wall Street for all this hype, and it’s easy to blame Facebook’s management for whipping up the valuation frenzy. It’s also easy to blame Nasdaq for botching the orders or Morgan Stanley for mismanaging the process.

The truth is that if small investors simply remembered they are nowhere to be found on the list of important constituents for an IPO such as Facebook’s, and simply stayed away, the traditional Wall Street IPO machinery would break down. Is that a lesson that can be finally learned, once and for all?

Facebook Status Update: Silence is not Golden

It would appear that investors are losing confidence and continue to look for yield that is transparent. Aivars Lode

Silence about the fear this latest technical and pricing failure of securities markets has engendered disaffection among mainstream investors. The ones who have already pulled half a trillion dollars out of mutual funds that invest long-term in U.S. stocks, in the last five years.

He watches television talking heads deconstruct the debacle. He reads newspaper and website pontifications. He is barraged by arguments he says are well-constructed, even highly-intellectual, but fail completely at addressing human fears.

“All of the voices that I encounter on this problem, they all sound institutional, they don’t resonate. I just turn off— I being the general public. The general public doesn’t listen anymore,” says Verdi, co-founder and chief executive of the ad agency Devito/Verdi.

If you think the fallout from the Facebook IPO will end any time soon, think again. Ad executives, public relations experts, wealth managers and financial advisors say that the debacle – whereby untold scores of orders never made it from an IPO crossing system onto the market and the price of Facebook shares barely stayed above their opening price on opening day -- represents a real danger for Wall Street.

It’s more than just further plummeting of Facebook’s shares: down to $28.68 a share at midday last Wednesday. That’s a drop of 24.5 percent from its ballyhooed opening at $38 on May 18 – when mainstream investors expected to get a quick pop from putting their money into the social networking giant’s shares.

But now, a $50,000 investment is worth only $37,737. And the Facebook experience will make it harder for Wall Street and fund firms to salvage their relationships with investors who don’t live and breathe the ins and outs of trading. Investors who have day jobs that have nothing to do with finance.

“Facebook stock has plummeted since its IPO, and the company is in the midst of a crisis PR nightmare. From minute 1 of a delayed launch with Nasdaq technical problems to lawsuits swirling around, Facebook is entering a danger zone,” said Ronn Torossian, chief executive of the public relations firm 5WPR. “The court of public opinion doesn’t wait – and this downward cycle of media attention is harmful.”

So far, financial firms are doing little to address this subject. Two-and-a-half days of comment requests placed to Facebook, Morgan Stanley, J.P. Morgan and Goldman Sachs as well as a dozen major asset managers were either declined or ignored as of press-time.

“I do not see any of the major wire houses or financial firms attempting to answer client concerns with this IPO,” says Philip Cioppa, managing principal and chief investment officer at Arbol Financial Strategies.

“No one wants to be implicated if an error was made or unethical behavior is discovered,” he says. “Communication is a lost art in the financial world.”

Meanwhile, financial professionals such as Paul Franke are stepping up to the plate and calming investors who otherwise feel ignored by the rest of Wall Street.

“Over the Memorial Day weekend, nearly everyone expressed their outrage to me at the failure of the Facebook quote to rise much above the offering price of $38,” said Franke, who is director of research at Quantemonics Investing and also manages a portfolio on the social media platform Covestor.

“With nearly two years of non-stop hype building up to the offering, the Wall Street underwriters really look bad pricing the stock well above any common sense valuation when measured against the other internet companies already trading publicly,” he says.

Scared investors can be dangerous investors. Just ask Mark Martiak, senior vice president and senior wealth strategist at Premier/First Allied Securities, a New York broker and financial advice firm.

During the financial crisis of 2008, Martiak had a client who, despite Martiak’s pleas, sold out of his separately managed accounts only to lose millions, when prices turned.

“He lost his confidence and couldn’t stomach consecutive daily losses,” Martiak said.

Investors in Facebook, now behind the game by 24 percent or more, have to take a similar long-term outlook. And recognize that it will be around for a lot longer than two weeks of trading.

“Advisors need to provide assurances daily when they sense that their clients are shaken by the market’s volatility,” he said.

In fact, some say that the Facebook IPO is already creating marketing opportunities for fee-only wealth advisors who adhere to fiduciary standards regarding costs. The argument being thus: if an advisor doesn’t make money per transaction but rather from a percentage of assets, there is little incentive to repeatedly push customers into new products that could be risky.

“In general, it’s reasonable to assume that the Facebook IPO has raised questions— if not concerns— among investors regarding traditional Wall Street firms. Specifically, there’s a growing awareness that because these firms do not operate under a fiduciary standard they can -- and do -- maximize profits at the expense of their clients,” said Anderson Wozny, Director, Financial Planning, Edelman Financial Services.

What can fund firms who put clients’ assets into Facebook shares do? First off, says ad exec Verdi, acknowledge the fact that investors are scared, and then treat them like human beings.

Fidelity Investments, the mutual fund company which also runs a large brokerage, said it was working with "thousands" of brokerage clients to clear up what happened to their orders, when Facebook went public.

“With the Facebook IPO, people feel like you are messing with the American Dream a little bit. I’m supposed to be able to participate in this and not be screwed in the process,” he says. “You can’t mess with the American Dream and then expect people to participate in Wall Street.”

Also, financial services firms somehow need to develop a single voice. When dozens of different industry executives get on TV and espouse dozens of conflicting opinions on financial events, investors get confused and alienated.

“You need a voice—where is the voice of Wall Street? Before I can even listen to you, I need to trust you. That is the part many are missing,” Verdi says.

To show that it is possible for a company to handle—well—a public black eye, Verdi cited the efforts of British Petroleum to regain public trust after the oil leak disaster in the Gulf of Mexico. Little actions can have big effects, he says, like educational initiatives at local high schools. All told, the petroleum giant has poured more than $150 million into promotions to help the region recover since the Deep Horizon rig disaster two years ago.

“It’s all about perception. The reality of all of this is so much less important than the perceptions. Bad perceptions can become reality if you don’t handle them properly,” he says.

European funds cut equities in favour of alternatives – Mercer

This is why we created our alternate asset class fund focused on software yield investments. Aivars Lode

EUROPE – Pension funds in Europe trimmed allocations to equities over the last year and increased their exposure to alternative assets, Mercer's annual European Asset Allocation survey has found.

The trend away from equities is set to continue, according to the consultancy. In the UK, for example, 38.8% of schemes said they were planning to cut exposure to UK equities, while only 1.4% expected to increase it.

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Nick Sykes, European director of consulting in Mercer's investments business, said: "As the euro-zone crisis continues unabated, pension funds are faced with the dual challenge of managing portfolio risk brought on by market volatility, while at the same time identifying opportunities that will generate returns to support future liabilities.

"In their quest to control volatility without sacrificing long-term returns investors have turned their attention to alternative asset classes," he said.

Falls in overall equity holdings at European pension funds were mainly driven by cuts in domestic equity allocations, according to the report.

Funds with less than €50m in assets saw equity allocations fall to 34%  – down from 40% the year before – while at the other end of the scale, average allocations to equities at large funds with €2.5bn or more dropped three percentage points to 24%.

Pension funds are now considering investing in a wide range of alternative asset classes, the survey of more than 1,200 European funds shows. Half of the schemes surveyed now have an allocation to alternatives, up from 40% last year, Mercer said.

The largest falls in equity allocations were seen at schemes in the UK and Ireland.

Funds in these countries still have the heaviest equity weightings among European schemes, but UK allocations to domestic and non-domestic equities fell to 43% from 47% over the last 12 months, while Irish allocations dropped six percentage points to 44%, Mercer said.

The gap between the traditionally equity-heavy pension funds of the UK and Ireland and funds from other European countries had now all but vanished, Mercer observed.

Their average equity allocation was now approaching that of Belgium and Sweden, it said.

The most popular alternative investment types for European pension funds outside the UK were hedge funds, emerging market debt and high yield bonds, according to the survey, with almost 20% of schemes allocating to one or more of these areas.

Mercer said this trend was more marked for larger schemes. About 60% of funds with €2.5bn or more in assets had allocations to one or more of these asset classes, up from 40% in 2011.

The most popular alternative asset classes for UK funds were diversified growth funds, global macro hedge funds and funds of hedge funds, with 23.2%, 13.6% and 10% of schemes having allocations respectively.

Sykes said schemes were looking towards asset classes that were less exposed to the sovereign debt crisis, focusing particularly on emerging markets for both equities and bonds.

"Investors are also looking globally for yield in bond markets, since the crisis has pushed core yields in Europe to very low levels," he said.

"Liquid asset classes are also favoured, as investors value access to their assets in such turbulent times."

Author: Rachel Fixsen

There are two types of value: intrinsic value and speculative value.

Thanks Rob, thoughtful and provoking when thinking about investing. Aivars Lode
Value.

The best definition of intrinsic value is cash flow.  Pretty simple. Easy to
calculate and mostly what "fixed income" (e.g. debt, bond) markets are all
about.

The other type of value is speculative value sometimes called equity. The
most obvious manifestation of speculative value is the stock market, where
"equities" are issued, then bought and sold, over and over.

Speculative value (equity) is basically the concept of buying and selling a
title to some "asset". (The term asset is used loosely in the context of
equities.) The buyer of the title to the asset believes that in the future
there will be some event or change of perception that will allow them sell
it for more money than what they paid when they bought it. The thing backing
up the equity could be completely vacuous like an eyeball looking at a
webpage (worth speculatively millions), or a physical thing like a building,
which may have a replacement cost of say $10 million but could be be worth
zero or even have negative "equity" (you have to pay to demolish it.)

In theory, over the long term, the events that create equity value are an
increase in dividends (more on dividends in a minute) or an improvement in
the balance sheet (retained earnings, accumulation of sellable assets,
issuance of notes payable, etc.). But in the real world equities are valued
on pure perception (speculation). Actually, the second or third derivative
of perception (i.e. "I perceive now is the time to buy equities, because I
perceive that others who do not perceive now is a good time to buy equities
will down the road perceive that others will perceive that they should buy
equities in larger numbers... "ad infinitum) In other words the equity value
of an equity is derived from the belief that someone in the future will
believe that down the road further, someone will else will pay more. It is
really that simple. The real trick to equity pricing is to try to figure out
what people believe and what is likely to change their minds - 100%
psychology and like ALL FORMS of psychology, no science whatsoever - just
feelings.

I am not saying people do not love to toss around numbers in equity markets.
Is there growth in earnings? Is there growth in revenue? Is this "expected"
or not (e.g. beat the official estimates and/or "whisper numbers")? Does
this company's "equity" have the same price to earnings, or price to
revenue, ratio as a competitor of the same size, balance sheet, same growth,
same margin, etc. If not, can these discrepancies be accounted for? Does the
company pay a dividend? Is it increasing?  etc. etc. But these are just
mental masturbations The only thing that matters is playing the perception
game. This is why stocks frequently go down after a stunningly good quarter.


Equity markets move from a numeric analysis to a perception analysis in the
blink of an eye,  That is not to say the numbers do not matter to some
extent, but numbers only matter to the degree they change perception.
So-called good numbers do not always lead to a good change in perception
(again, not the first derivative). There is a ton of evidence in equity
markets that demonstrates these phenomenon, but my favorite is looking at
the stock price movements when a company "misses the quarter" could go up -
could go down - could stay the same - depending on what the expectations are
and how they changed. Hence the source of, "I buy on dips."

One other note before moving on to intrinsic value is an analysis of
dividends. For equities that pay dividends, a partial intrinsic value can be
found in the ratio of dividend amount to speculative price. But be careful,
paying a dividend actually reduces the theoretical equity value of a company
(reduces cash).  Dividend values of equities (unless the dividend is
abnormally high compared to a corporate bond) is typically a minor kicker to
the stock. Increasing dividends has a de minimis impact on equity value as
compared to speculative values (i.e. the attempt to buy low and sell high).
Sometimes an increase in dividends will move a stock, but not because of the
intrinsic value, but because it is perceived to be a signal that will be
perceived by non-believers that the company has more "good news" which will
further change perceptions in the future. I am quite serious.

Bottom line: equities are valued on speculation.

Intrinisic value is a whole 'nother kettle of fish.

Intrinsic value is almost all mathematics. Intrinsic value is simply the
cash flow generated by an "asset". The formula can be quite complex taking
into account the net present value of the cash flow and the risk the that
cash flow is not secure and steady (predictable).  But no cash flow - no
intrinsic value. Period. For investors to balance a portfolio the future
will be products that have a relatively high cash flow (yield) with
relatively low risk.  Funds that do not take equity, but accumulate "bonds"
by concentrating on securing intrinsic value claims (cash flow) via secured
structures will provide stability in an investment portfolio.  Investments
are technically more like Convertible bonds than straight debt, because of
covenants that give ultimate control of operations without a traditional
default event. Funds like this are the future unique, modern,
differentiated, not a PE, not a VC, not a traditional bank, not a
hedge-fund, etc.

There is some confusion around intrinsic value "assets" like corporate and
government bonds because, in addition to yield, they also have a "price" -
i.e. some bonds do indeed trade. Bond trading is the result of a pseudo
perceived speculative value around relative yield and relative risk.  The
factor that causes speculative changes in the price of bonds is the global
shifts in interest rate expectations (speculation) for the same level of
risk. If you own a ten year U.S. Treasury eight years away from maturity
with an intrinsic value (yield) of 2% and the market begins to speculate
that the government will next issue ten-years for 2.2%, then the "price" of
your bond will go down. Notice that the price of the bond does not change
when the new higher rate bonds are sold if the speculation on future rates
is confirmed and does not create new speculation. But this assumes you would
sell it before maturity (now). If you own a ten-year bond with one year left
to maturity the speculative impact of a change in global interest rates is
tiny. If your intent is to hold to maturity the "price" of your bond beyond
intrinsic value is irrelevant.

Consequently, intrinsic value assets that do not trade do not have
speculative value. Intrinsic value assets that do not have a maturity are
probably impossible to speculatively price objectively, anyway.  The only
objective value is the current cash flow.