Thursday, September 25, 2008

Odds & Ends

A few housekeeping issues:

1) Here is a list that I put out on September 11, 2008 (just 2 LONG weeks ago: feels like 2 months ago given all that has happened since then):

Given that WaMu appears to be done as of tonight, a review appears to be in order...

Here is my list of candidates once LEH and WaMu are done. I have no special insight, just the way that they are trading:

Bear Stearns

Fannie

Freddie


Very Likely and soon?

Lehman (Sept 14th)

WaMu (Sept 25th)

National City (not yet?)

MBIA (not yet?)

Ambac (not yet?)

Wachovia (not yet?)

AIG (Sept 17th)


Eventually? Some type of takeunder/breakup?

Merrill (Sept 14th)

Citigroup (not yet?)

Morgan Stanley (not yet?)


While the list is shorter now, there are still plenty of candidates left.


I think that JPM got a nice deal on WaMu and I may actually look at buying some JPM when I feel that this bear is ending AND if JPM shows good earnings and technicals at that time. Note that "that time" could be in a month or in 5 years...


2) I kicked out some of my shorts on Tuesday and gold today and I am currently about 90% in cash with a few small positions left. I did so anticipating a big up day (today would qualify) once the bailout's passage seemed likely. Tonight there is news that the bailout is in trouble, so Friday may be a down day. While I believe that the bailout won't ultimately work, the market perceives this bailout to be necessary to avoid a crash, so if we don't get a bailout by Monday morning, look out below!


Assuming a bailout, I think the market has an upward bias here, but I am looking to reinitiate at higher levels in October. Just not sure how to make money on the short side given all the recent manipulative actions from the SEC.


3) One note about the Canadian dollar: While I have a lot of Canadian dollar cash (mostly in the CDIC insured Altamira Cashperformer), I am very bearish on the loonie here. Back in April, I saw the Canadian dollar heading to 92 to 94 cents (it was at 98 at the time). We hit 92ish 2 weeks ago and since then, we have bounced all the way back to 97! I have been buying US dollars this week.


My reasoning: This is an oversold bounce for the Canadian dollar as oil bounces and as the perception is that US finances are in shambles (they are). However, in a credit crunch, debt gets extinguished and much of the debt out there is denominated in US dollars and was used to buy real estate and lever up in commodities. As most asset classes fall (a global margin call), the US dollar will rise, as it did since mid July (while gold & commodities sold off).


I hold some US cash as I think that if we take out 92 cents, we could eventually settle at 85 cents, if we get a market meltdown this fall.


4) My winter outlook may not be "cold" enough as I think that there is now a risk

that if the market is not saved here, that we go lower than I initially thought (S&P 1080) to S&P 990. This would translate in to roughly 9000 on the Dow.


Risk is high here, bailout or not...

2 comments:

jen said...

It looks like Wachovia is on the ropes tonight:

Citigroup and Wells Fargo Said to Be Bidding for Wachovia

http://tinyurl.com/4rjm3u

It seems odd Citi could think of pulling this off, and if they can't, I'd argue they'll be next.

Adil Burney said...

Wachovia is definitely on the ropes. I agree, not sure how Citi can make a bid as they need to divest not add at this point.

If I were Wachovia I would take a deal from Wells Fargo (if it comparable) as Wells is in much better shape.

I was tempted to buy puts on WB post short manipulation (you were not allowed to short and shorting in these stocks can be dangerous because you never know when someone will overpay a la BAC/MER), but I did not as I was too shellshocked.

Looks like WB is going out for a few bucks...

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