Global Financial Performance

As of yesterday, just 11.6% of the stocks in the Bloomberg World Financial index were up in 2008.  At least some are up!  Below we highlight the best and worst performing stocks in the index year to date.  As shown, a Chilean financial firm is up the most at 225%, followed by Climate Exchange in Britain at 92%.  There are multiple financial firms in the Middle East on the list of winners as well. 

Surprisingly, the US does have some representation on the positive list.  Oritani Financial (ORIT) out of New Jersey and Dime Community Bank (DCOM) of New York are both up about 30% on the year, while Capitol Federal (CFFN) (out of Kansas) is up 23.8%.

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There's much more pain on the downside than there is joy on the upside for Financials.  While just 11% of global financials are up on the year, 16.6% are down more than 50% on the year.  Below we highlight the ones down the most.  As shown, the US has a lot more representation on this list than the one above.

Comments

[Ishortyou]

In respect to AMBAC and MBIA, they need to keep and save all the cash possible including stop paying dividends, deleverage AGGRESSIVELY from all their risky liabilities specially those CDS-CDO's, RMBS-ABS of uncertain value, in order to remediate their book values, once their book values are sound they need to reinstate their triple A rating again to write new low risk public bond insurance business. They can also open or extend a line of credit to make sure to continue operations and dissipate doubts. This will also prevent further downgrades from rating agencies.

They are already doing these, so it will take some time to deleverage their books from uncertainties and rewrite new business again. This coming back will be the best advertisement to recruit new clients.

[Common Sense]

The shorts are the only thing pushing Ambac down to the current levels. When the shorts scramble to cover, you will see where the true value of the stock lies. I must say, the shorts that are still in Ambac at this point have a pain tolerance that is much higher that the average investor. When they start covering, the current price of just over $1 is going look a little silly. When covering starts you are going to see a gap of around 25% to the up side. With out shorts, Ambac would be priced north of $5 right now, most likely around $12. If you are long, you really can not beat the shorts out, they are too strong. Some advice would be to dollar cost average your position and take advantage of the under weight price provided to you by the shorts. When they decide to leave, you will be very happy that you did.

On Jul 02 10:12 AM Ishortyou wrote:

> In respect to AMBAC and MBIA, they need to keep and save all the
> cash possible including stop paying dividends, deleverage AGGRESSIVELY
> from all their risky liabilities specially those CDS-CDO's, RMBS-ABS
> of uncertain value, in order to remediate their book values, once
> their book values are sound they need to reinstate their triple A
> rating again to write new low risk public bond insurance business.
> They can also open or extend a line of credit to make sure to continue
> operations and dissipate doubts. This will also prevent further downgrades
> from rating agencies.
>
> They are already doing these, so it will take some time to deleverage
> their books from uncertainties and rewrite new business again. This
> coming back will be the best advertisement to recruit new clients.
>

[glassbox]

Question:

Where are the shorts getting their stocks to short?

What does it cost the shorts to hold a short position?

Do longs know that their stocks are being lent?


On Jul 02 10:55 AM Common Sense wrote:

> The shorts are the only thing pushing Ambac down to the current levels.
> When the shorts scramble to cover, you will see where the true value
> of the stock lies. I must say, the shorts that are still in Ambac
> at this point have a pain tolerance that is much higher that the
> average investor. When they start covering, the current price of
> just over $1 is going look a little silly. When covering starts you
> are going to see a gap of around 25% to the up side. With out shorts,
> Ambac would be priced north of $5 right now, most likely around $12.
> If you are long, you really can not beat the shorts out, they are
> too strong. Some advice would be to dollar cost average your position
> and take advantage of the under weight price provided to you by the
> shorts. When they decide to leave, you will be very happy that you
> did.
>
> On Jul 02 10:12 AM Ishortyou wrote:

[BottomFeeder]

I am here! Picking up ABK as they fall. Ambac will survive and they are finally in my price range. I have 10 years to watch the turnaround, as I am pretty young still. Thanks to all the chickens(aka Bears) in the market, I am getting everything at 75% off. It's like a sale everywhere! This is great!

[David White]

Now Bernanke is requesting more power from Congress to regulate banks, including investment banks. It looks like the markets are responding positively to this. The question now becomes, why hasn't the SEC done a better job of regulating the banks? It does seem that the Fed might be in a good position to achieve a better result if it had this further power. However, is this something we want a regulatory agency to be able to change on a whim? How hard is it for the SEC to regulate this area? Why have they not done so effectively (at least for this situation)?

[fredthfox]

Hey Bottom Feeder, Keep buying ABK. As soon as they do a 30:1
reverse split you will see what few shares you own selling for somewhere around $60.