najdorf

What Hedge Funds Are Buying and Selling Now

markfl: If you're not reading anything pro-CRE, doesn't that make you worry that bad news is priced in and good news will be rewarded with price gains? From a sentiment point-of-view, I'd always rather short something that people love with comical valuations.

That said, I'm sure that if you know CRE very well you can find some disasters. However, there's typically going to be a floor under the losses because real estate is worth something even under the worst of circumstances - you're going to do better shorting tech companies with no revenue or financials levered 30-1 than any of the CRE companies that have some revenue and less leverage.

Also, remember that America has such a love affair with entrepreneurship and real estate that no matter how bad things get, idiots will appear to hold up prices. People will open marginal businesses or buy up vacant space at 5% off right up until the collapse of our economic system. I could walk down my street and show you ten restaurants that will never be profitable and ten stores that couldn't pay the owner a decent salary even if they turned over their whole inventory every week, but hope springs eternal.

Eskin: Since gold and silver as investments have essentially no fundamentals (no earnings, no fixed rate of exchange for other goods, no risk of short supply relative to actual demand), the pricing of them is arbitrary and entirely sentiment-driven. We could easily decide that gold is worth 5x silver, 10x silver, 100x silver, or 1000x silver. It doesn't matter which one we choose, except that it would obviously affect how miners invest their capital. Trying to guess whether gold or silver is a better "value" is a mug's game.

I would also assess that investing in something which produces no cashflow (metals) is pretty foolish, but I suppose that there are two possible perspectives:

1. You think that the world as we know it will collapse and paper money will end. In that case, you probably want to steer away from anything other than physical gold. You'd also probably derive more benefit from guns, canned food, and a secure, stable place to live, but maybe once you have all these things some gold bars buried in a safe might be better than the alternatives.

2. You think that paper money will continue, but people will continue to place a higher and higher value on gold based on fear/greed. You are a Beanie Baby investor. Good luck with that.

Fear and Loathing in 2009

Nonsense after nonsense. The original post makes no sense: nothing but bearish sentiment followed by sticking to positions that the writer is married to because he's facing huge losses on all of them.

whisperonthewind: Do you know anything about banking? Why would banks pay 4 or 5% for standard deposits that could depart any day when the government is essentially handing out free money? Are you that stupid? Many banks are issuing new mortgages at 5% and below - where do you think their interest margin is going to come from if they start paying equally high rates on deposits?

I should know: You already know that you were wrong once (driven and derided by greed in July - selling WFC for 20? What did you think, that we were never going to have any banks again? You should go into business as a contrarian indicator!). Now you're wrong again. WFC is not the First National Bank of Purple Unicorn-Land. They were in every type of bad lending - interest-only, subprime, Alt-A, HELOC, no-doc, ARM, etc. Maybe they didn't go as far into the joys of negative-am ARMs as Wachovia, but they remedied that mistake by purchasing them. Why would you trust any bank's marks when all of them have had to take further writedowns and loss reserves every quarter for the past year? Of course financial bulls will eventually be right, but it doesn't really matter if you're right about one bank (which you accidentally sold) 10 years from now when your other investments have blown up along the way.