"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

03 January 2007

Big Boyz Trying to Whack Aggressive Hedgies

GS, LEH may well be trying to kill a hedge fund with a leveraged long gold/short dollar position today. It's pretty unusual to see such wierd first day of the year market action- panic soaring futes, precious metals crushed, commodities crushed (oil down 4.5%, copper down 7%), Tick and TRIN up sharply on open, dollar soars a half penny vs. euro, bonds soar at resistence (handy), and Ford truck sales down 11.8% YIKES ! and with a big benefit from fleet sales...

And Da Boyz are busy hammering another leveraged energy long. OIH crushed day after day on the "East Coast weather report" Crude down 4.6%?? UFB!

Bears are apoplectic
Copper down a 1000 dow points (bear post)
The beginning of a deflationary death spiral or the beginning of a golden/not to hot ...not to cold, perfectly balanced US debt and housing economy????????
IMHO the end of debt inflation is the end of life as we know it

Funny, this was same view of Jim Paulsen, PermaBull at Wells Capital this AM. And Franklin Mutual is pushing investors to buy "Bargain Banks":

Investors have been running away from bank stocks for a number of reasons, notes Franklin Mutual Advisers' Michael Embler. One is a fear that the economy will slow -- which would boost the number of loan defaults. With sales of homes dropping, the mortgage business has weakened. Bank stocks have also been hit by the peculiar pattern of interest rates that is known as an inverted yield curve. Historically, longer-term bonds have yielded more than shorter-term ones -- the additional yield is the reward that investors get for being willing to lock up their money for a longer period. But that's not the case today. While two-year Treasuries recently yielded about 4.7%, 10-year Treasuries yielded only 4.6%. This inverted interest rate environment puts banks in a squeeze. Banks generally raise cash by selling certificates of deposit or taking short-term loans. They then earn profits by lending the money -- at higher interest rates -- to customers for mortgages and other long-term debt. These days, profit margins are sinking because banks must pay relatively high rates "on the short end" to borrow. So it's a little tough for banks now -- and that can be good news for patient investors. Bank profits will be shaky for the next year or so, Embler says, but when the economy perks up again, the stocks should recover nicely. In the meantime, dividend yields are very attractive. Embler's favorite bank bargains now...

U.S. Bancorp (USB). This large, Minneapolis-based commercial bank has a solid, core commercial bank that is augmented, in particular, by strong fee-based businesses, including payment services and asset management. Recent share price: $36.03. Recent yield: 4.5%.

Washington Mutual, Inc. (WM). One of the country's biggest mortgage lenders, Seattle-based Washington Mutual should emerge from the housing downturn in a stronger position as lesser competitors fade. The bank also has growing credit card and multifamily housing lending businesses. Recent share price: $45.25. Recent yield: 4.7%.


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