Friday, May 9, 2008

End of the Week Thoughts.

Regular readers know well how I feel about that 3 headed monster known as Cerberus. My last comment back on Dec 18 was as follows;

To think of the smartest guys in the room errr sorry I meant to say Cerberus, and their escapade into the mortgage arena and now the auto industry, I truly wish I was a fly on the wall in their strategy meetings, just to hear how the smart money, master of the universe, MBA draped, Ivy league type discuss their monumental screw ups. For some reason I have gut feeling that a mirror is in no way involved.

Now we get news that ResCap needs more money. My favourite comment the the linked article from Bloomberg was the one by Pete Hastings from Morgan Keegan;

"It's good for GMAC in that it shows support for a troubled operation and it suggests the strategic importance of the unit,''

You cannot make this stuff up folks. ResCap is headed right where that other brilliant Cerberus investment Aegis went, the bankruptcy heap. I have a suggestion for anyone out there holding GM stock, get out and get out now before it becomes, I hate to say this, worthless. I am no accountant but you tell me how they can stay in business without divine intervention. As for Cerberus investors, govern yourself accordingly as you are all accredited.

Mike Panzner had a great piece I caught yesterday called Here Come Freddieeeee ! For those that are not visiting his site Financial Armageddon, you are really missing out. And for those scared of what people will think if they see you on that site or with a copy of his book on your desk or bookshelf, then might I suggest continuing listening to Dennis Kneale, Vince Farrell, Larry Kudlow et al. with a few Hail Marys thrown in for good measure. I have lifted Mike's entire post and reprinted it below.

Here Comes Fredddiiieee!
When they were at the investment bank Dresdner Kleinwort, strategists Albert Edwards and James Montier were sometimes labeled as "permabears" because of their persistently negative views on the excesses in global financial markets, among other things.
To some, that would be enough reason to dismiss their commentaries as worthless rants. But as of 2007, in fact, those two individuals were ranked number one in the Global Strategy category for five straight years and number one as a team across all sector categories for three straight years in the annual Thomson Extel survey of analysts.
Aside from that, of course, their concerns about the underlying health of the financial system proved prescient, given the consensus view that the crisis now occuring is the worst since the Great Depression.
Anyway, Edwards and Montier left Dresdner, and over the past year or so, they have been toiling away at French bank Societe Generale, where they serve as co-heads of global strategy.

In "This Week’s Advice: Canned Food, Guns and a Ham Radio," David Gaffen at the Wall Street Journal's MarketBeat blog offers up a sampling of their latest no-nonsense insights on where things are headed.

The prevailing view among investors throughout the duration of the post-Bear Stearns recovery rally has been that the U.S. and global economy might continue to weaken, but economic performance would merely be lackluster, not terrible.
Strategists at Societe Generale say nuts to that in commentary today, lowering their recommended weighting for equities to 30% and boosting their weighting for bonds to 50%, saying “we are on the cusp of an equity meltdown that will slash and shred portfolios like Freddie Krueger.”
Soc Gen strategists have been bearish for about a decade, as they note in their commentary, as they expected equities to go through a period of “valuation de-rating similar to Japan.” Albert Edwards, strategist at the bank, increased his low equity exposure to 45% earlier in the year on expectations of a bear-market rally, but those days are long past as he considers the possibility of a further decline in stocks — and rants against those who would mindlessly advise buying equities.
“One of the clearest impressions that I will take away from working in this industry is how darned bullish everyone wants to be,” he writes. “To be sure, nobody likes to be a party-pooper but the bias towards optimism in this industry is truly staggering.”
Seriously, Mr. Edwards. Tell us how you really feel. “With many of our favored technical indicators flipping from excess bearishness in January, to excess bullishness today it is time to sell and head for the hills,” he writes.

Some candid comments from a couple of fellas not afraid to tell it like it is. Refreshing change don't you think. Thanks to Mike Panzner for catching and posting that.

Citigroup having a 4 hour love fest with Wall St. today. Planning to sell 400 billion in assets. Everything is fine, oh about that garage sale we're having. Don't worry we don't need the money the credit crisis is over. I will repeat again that Citi is a single digit stock. I have no idea who Vikram Pandit is but I will tell you one thing. As bright as he may have been running Old Lane and that is questionable given the write downs Citi is taking regarding purchase of Old Lane, a global bank manager he is not.

Here's a suggestion to Citi shareholders. Go back and listen to pompom TV's interview with First Niagara Financial (FNFG ) head honcho John Koelmel. I don't know him but if first impressions count for anything this cat has impressed me and looks like a straight shooter.

Open Positions:

Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $12.64
Long 2 units Ultrahort Real Estate ticker SRS @ $85.35 stop at $81.84
Long 2 units Ultrashort MSCI ticker EFU @ $76.25 stop at $71.72
Long 2 units Powershares DB Agriculture ticker DBA @ $36.35 stop at $35.24
Long 2 units Ultrashort S&P500 ticker SDS @ $57.05 stop at $53.17
Long 1 unit Ultrashort Russell 2K ticker TWM @ $74.60 stop at $69.92
Short 2 units Daimler AG ticker DAI @ $86.20 stops at $82.48/$81.38
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 2 units Retail Holders ticker RTH @ $97.20 stop at $98.56
Short 2 units Research in Motion ticker RIMM @ $133.10 stop at $135.72
Short 2 units Goldman Sachs ticker GS @ $197.95 stop at $204.14
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 1 unit Lehman ticker LEH @ $43.70 stop at $48.57

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