i sell these funds heres my thoughts

(in response to this article)


Barton Biggs Expects 1,000-Point Gain in Dow Average
By Brian Sullivan and Michael Patterson
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3srM5UWs8NQ&refer=home
March 14 (Bloomberg) -- The decline in U.S. stocks is ``way overdone'' and the Dow Jones Industrial Average may rally 1,000 points, investor Barton Biggs said.

``We're in a financial panic,'' Biggs said during a telephone interview with Bloomberg Television from New York. ``We're setting up for a really big rally. I don't mean three or four hundred points on the Dow, I mean 1,000 points on the Dow. I don't know if we're going to get it next week or the week after. But this thing has gotten crazy and is overdone.''

Biggs, a former Morgan Stanley strategist who now runs the $1.5 billion hedge fund Traxis Partners LLC, he's being squeezed………etc




ROTFLOL. Right, lets recap on whats going on

the 2004 vintage of packaged cdo's and siv's have been exposed as low quality and suffering default & foreclosure and downgrade. this is what has caused the sub-prime problems THUS far.

the 2005 and 2006 vintages were THE bad stuff. never mind whats happened so far. This is soon to hit the market like last the 2004 vintage writedowns hit us last year

the US is slowing down. wages growth is down, spending is down. this means consumers will default, as they are. plus loans are adjusting upward. "there will be blood" is not just the name of a very boring movie with some fine acting.

these banks are holding this paper and have marked at last sale price, not to market. Worse still hedge funds and others have leveraged into this stuff. They got $500m from investors, leveraged it 30 times, bought $15b of the stuff, and now they are afraid to price it for fear of being margin called, or being asked for their investment back from the lenders.

in the meantime some players in the industry are getting margin calls, thus we are getting forced selling.

you have more chance of saying the word jehovah to a rabbi than the words margin call to a hedge fund manager. one will cringe the other will shrivel up turn white and run and hide in a corner. I am not even close to exaggerating about this either

we had the bush $150b free kick. we had the interest rate cuts. we had the fed rates cut. we had the $200b liquidity throw. the market has fully priced another 75bps next week. the plunge protection team can't prop up a falling market for much longer- it couldn’t last night. The real fear is that there is NOTHING left to throw at this. If we get forced selling there is no one who can buy. Everyone who would buy already has. It was ridiculously cheap 10% ago. There’s still cash, but not enough to keep prices up in a forced sell of (lets not even factor in program trading)

Its going down because there is debt, lack of liquidity and bad paper that has not been provisioned for.

never mind CLDs and swaps. Even if the US could fix this mess, which they can't, the following are the fundamentals which portell the end of the USA as the global giant it once was.

A fiscal deficit which cannot be turned around
A trade deficit of unfundable proportions
An aging population = 2020 medicare and social security failure.

The country is finished. FINISHED. Of course it will still be huge, a global powerhouse, but things will be very very different, that’s all

This joker from morgan stanley is probably worried that he will get margin called, or the holders of the assets in his portfolio will themselves get called, and the same assets that are in his portfolio will be marked down.

Inside his product are likely provisions by the investors or lenders. He is probably afraid he will be a forced seller into a falling market, I know I would be.

what that means is that the worse this gets, the worse it gets. It is self fulfilling.

There is no blood on the streets yet. Do we really think we can get out of the CLO CLD SIV CDS mess, where 10% of home loans are defaulting, with just a 16% fall in the Dow? No way. Pain first.

I was watching bloomberg this morning, david t wice (?) from prudent bear was on. he was right. 40% to go



(a reply in regards to we’ll know in 2 months)



2 months? try 2 weeks. No, 2 months is closer, but with Carlyle and bear sterns we don’t know the systemic flow on here. It could be 2 weeks. Plus reporting next week and futures contracts expiring, and a short week, no one will want to be long next week.

We all take turns in sending messages. Its called managing expectations and watering down the market.

The fund managers tell me, I tell my boss, he tells the industry and the media, then malcolm maiden and alan kohlr and barry dunstan have their story for the next day.

Most of the time what you hear is what we are telling you through them. But I have to give the guys in The Age newspaper credit. Todays business section was top shelf. Worth the $2 to buy whichever city you are in. really good, they are onto it, as is ABC radio. My wife fills me in on what they are saying and they are on the money. Choose Fairfax print over newcorp. Their strength IMO is the TV guide, pictures of that overexposed model whats her name- …the David Jones girl? Can’t remember, but the brand power woman is more attractive if you ask me, oh yeah, megan gale, megan, the TV guide, the comics and racing section. Stick with Fairfax print.

There is a real problem going on. confidence and liquidity. oop, just got another sms from my mate who runs a hedge fund here in sydney

okay, he says "if carlyle was willing to take a hit to their reputation by cutting off more loans you have to be worried. then again i heard that a select few bonds (solid credits) are beginning to tighten vs treasuries....

heres the previous one....."the important question to ask are how these positions have been financed because bad marks to a nonexistant thin market will kill most leveraged carry type trades. funny thing is besides mortgage backed i don't think default rates even count into these valuations."

The one before that was “but then again it might be wise to stock up on guns and canned goods as a hedge”

What is happening right now in OZ and the US is that auditors are in banks looking at their paper positions and provisions. the banks are marking their paper to last sale price. this stuff isn't selling. so the last sale price is VERY out of date. Tick tick tick anyone?

the auditors will go out and get an ebay price- as i've heard it called here. i like that term, i'll run it in the media next week and see how far it goes. then they will have write downs and the cash they had set aside might be, uh, gone perhaps, as might dividends. and we don't want that!

there are so many factors at play. but dont, DO NOT, believe good news storytelling in the media. Its people protecting positions. remember, these are the SAME people who got us into this mess. like “insert US reating house” with their "end of the tunnel" story which caused a rally this week. are they kidding? end of the tunnel? thats a train guys.

so why would they say that? well, maybe they didnt rerate ambac and MBIA which they should have because they know it will force the end of the system, so they have to give a positive reason why they don't consider they have to. That’s possible

just go to any chart on AMBAC and MBIA and look at their share price and market cap and tell me, can they cover $880b of CDOs and CDS's? no way, they are down 90+%, they can cover maybe $4b. maybe. so the S&P moody’s and fitch of the world have to say well we think its near an end. because if in 6 weeks AMBAC goes under and someone lent against a structured produt of AAA, BBB and sub inv grade CDO's on the strength of an AMBAC guarantee which was backed by an “insert name of rating house” AAA rating, and the holder of that security liquidates it and gets 2c in the dollar back on it, and sues them as to how could they NOT have rerated AMBAC down to junk (which WOULD cause the end of the system as we know it), then “insert name of rating house” can say "hey, we reasonably believed the troubles were over"

its called mitigation, or "cover your arSe". pardon the language.

the other thing is, protecting against a run on the system. i have a mate who sells a hybrid fund- full of CDO's, resettable preference shares, notes, that kind of stuff. he's been hammered of late with their exposure to MFS, ABC, Allco, Bab& Brown. He's down probably 14% rolling 12 months. BUT, its pretty good otherwise. its taken the brunt of it and 25% of the securities inside the product (which has about $440m in it) will mature inside 12 months, and they repay at 100c in the dollar. now some of these securities are trading at around 70 and 85c in the dollar. these are safe! I’ve gone through the portfolio with him over a beer. Some of these redeem in 12 months. the underlying companies are healthy. this conversion is factored into their share price. some of these things have a yield to maturity around 20%!!!! and so why is he sh-t scared at the moment? because the fund has NO cash in it. No applications with redemptions means selling, no one to buy means use up cash to fund redemption. So, if mum and dad wake up on monday, and hear the parent bank in the US or Switzerland or wherever is having troubles, their adviser, who took it up the date reccommending Basis capital to them for their income product (on the back of “insert name of rating house” recomendation by the way, sits there and says "heck, if i get this wrong i'm out of business with these clients, i better redeem, even though its probably not in their interest to do that"

So he is 100% worried about next week, all he is gonna do is manage expectations so the advisers dont redeem, because once they redeem, then his portfolio managers have to sell this stuff into the market that is offering stuff all for good securities (and I mean stuff all). and so then the remaining assets in his and competing funds get marked to the new price, and so it loses another 6% next week, and then “insert name of rating house”, , see that the price has fallen more than normal volatility, and send a please explain email to him, and then they get worried because he doesn’t reply for 3 days, and so over lunch they mention to a friend (because we are all gossip wh0res in this industry) "i've heard that ACME funds management global yield fund) are having some problems, and then it all becomes self fulfilling, for absollutely NO reason.

And this is for a GOOD fund. I can tell you about the shite funds out there, like the fund manager that has an income fund with half the portfolio in unlisted securities, and they haven't re/priced their assets in some cases up to 2 years! Is that a ticking time bomb? You tell me. its doing +6% while its competitors are doing -10's. while aussie property is down 30%, global property is down 40% and shares are also being hammered. you think they aren't scared? we haven't heard much from them. low profile. although one economist joker came out this week and said the Aussie dollar could be at parity to the US Dollar by June- or it could be at 85c. what a joke. my 12yr old daughter could predict it better than that. And this is what their hedging positions are being built on? This is your super money too people

like i tell you, we ain't seen anything yet. but, the good is being thrown out, no- the VERY good, is being thrown out with the bathwater in the meantime.

so, what to think of it all?

don't trust "houses"- they ALL have butts to cover, key points to hammer and axes to grind. every word that comes out of them comes from a lawyer too.

wait until there is blood in the streets and buy. thus far we've had a paper cut. i mean a real amputation. leatherface the texas chainsaw massacerer type. 10 hedge funds have folded. wait until 110 more fold.

avoid banks. whats the upside? if they are up then so are resources and energy. oil gas, coal, wheat, WATER, gold.

learn how to speak mandarin, get used to vodka and consider india. yes the men do all wear white shirts look the same and hold hands in public, and the country does smell, but don't ignore it for investing.

Lets see what Monday brings. I’d say down 160 points. Recover Tuesday, down Wednesday, no trade slim Thursday. But I might revise that at 10:03 on Monday.

Have a good weekend guys, whatever remains of it