They might have overpaid

Last year a consortium of banks took over ABN Amro. Barclays made the first bid (67 billion euros). Then a couple of weeks later RBS, Fortis and Santander put a bid out for 70 billion euros. That bid was accepted and the banks split up ABN geographically. Fortis got the Dutch and Belgian operations, Santander got Brazil and Italy (the better part of the deal) and RBS got ABN's wholesale operations as well as Asia. At that time it seemed like a ridiculous (not smart) deal. Today, it looks even worse.



Source: EconomPic Data

THE BOTTOM: I'M CALLING IT.

7,550 is the lowest we'll see on the DJIA in 2008/9. While I've always been hesitant to throw my guess alongside everyone elses', I truly believe we've established a market bottom. I do, however, believe we will re-test the low at least once before establishing the uptrend that will lead us out of this bear market. As such, I've sold DIA JUN 75 puts.

Heebner's Bold Move

According to filings with the SEC, mutual fund legend Ken Heebner has put his confidence behind the auto bailout plan with a nice stake in Ford Motor Co. (NYSE:F) via his high-flying CGM Focus Fund (CGMFX). Heebner, known for his ~80% return in 2007, runs CGM Focus much like a hedge fund; he invests in companies of any size, anywhere in the world and goes both long AND short.

While I find it difficult to bet against such a coveted fund manager, his position in Ford is pretty hard to justify. If his position was claimed on the September 30th 13F filing, he must have built it up prior to the end of September, at which point Ford was trading in the $4.50-5 dollar range, far above its $2.95 close on Friday. Has Ken joined Legg Mason's Bill Miller on the "Hot-Gone-Cold" list? I don't think so. With $5B in assets in CGM Focus, a mistake here and there is bound to occur.



Disclosure: I have money with CGM LP.

MBA? No way.

For all those thinking about their future, it looks like you can take "MBA" off the "MUST DO" list.

PE MBA

Oh the Irony...

Watch your wallet boys and girls...

Visa's credit card thief

U of M hit by credit crunch.

That's right ladies and gents...the Univ. of Michigan has made a "follow up commitment of $40 MM" to a credit fund run by Bain Capital affiliate Sankaty Advisors. The firm, most recently known for it's huge losses which forced it to raise new capital, has supposedly been asking current investors to pony up cash for margin...
Check out the minutes of the most recent meeting of the Regents for more info.

UK Deflation? One Hedge Fund Thinks So

*gasp* Justin is posting on the blog? *gasp*

Yes, yes I am, and this time my appearance doesn't have to do with me making fun of an investment bank.

So, more to the point, Ecletica Asset Management is a London based fund that is up over 35% this year. Yes, that's right, I said up... double digits. Not to be confused with Citadel's October performance. So what are these guys doing to make money is such a terrible investing environment you ask? Weeeeeell, recently these guys picked up a large number of British WWI perpetual bonds with 3.5% coupons. They did this betting that the global recession will have a very negative impact on the UK's inflation rate (which currently stands around 4.5% mind you). So, now you're thinking to yourself, why are they buying WWI bonds? Well the reason for that is simple. Being perpetual securities, these things have reeeeeeally long duration, which is a fancy way to say they're way more responsive to interest rates than normal bonds are. So, if and when the inflation rate falls in the UK, the yields on these should decrease causing prices to rally substantially due to the high duration of these bonds. Hugh Hendry, the guy who runs this fund, said, "If you have a deflationary shock, the only instrument that will perform will be government debt. Inflation is going to be back some day. But forget the next 12 years; it’s the next 12 months that matter." So? Get short some long term fixed income securities anyone?