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It's been a busy day and I haven't had a chance to get to the blog. As all know, I've been quite bearish and I believe that the end of the beginning may be here soon. That means a true bear market where truly significant losses are common place for years on end, with intermittent bull runs. This is where value investors get burned because they can't tell the difference between value and price. Just because something is a lot cheaper doesn't mean it is a good value. Value is price as a function of future reward, not just a low price. There are some pretty big names that fell into this trap, primarily due to a lack of respect for macro shocks that stem from the residential/credit market crash. I have been very bearish on nearly everything that is connected to the macro crash, and I am basically a value investor.

A quick list of the big name brand investors who fell into this trap that I have harped on so vociferously...

  1. British billionaire financier Joseph Lewis owns 9.6% of Bear Stearns. He has acquired nearly 2 million more shares. In September 2007, Mr. Lewis had become the single-biggest investor in Bear Stearns, acquiring shares soon after two Bear hedge funds collapsed because of bad bets on securities backed by mortgages. He spent some $860 million to buy 7% of the company when the stock was trading at more than $100 a share. However, with the stock's fall, Mr. Lewis has a paper loss of well into, if not over the $100 to $185 million range (depending on the effectiveness of his hedging, he owns at least 706k puts on BSC stock). The latest SEC filing said Mr. Lewis has spent about $1.19 billion to buy Bear shares, spending an average $107.31 each. Also, in October 2007, Bear Stearns and Beijing investment bank CITIC Securities Co. agreed to invest about $1 billion each for minority stakes in one another. The companies agreed that CITIC's resultant ownership in Bear Stearns can be expanded to as much as 9.9%, and Bear's combination of convertible-securities holdings and five-year options in CITIC could, over time, amount to about 7% of the Chinese investment bank. These investors obviously have an outlook on the bank that is contrary to mine, and would obviously be on the opposing side of any trades that took place.
  2. Carl Icahn offered to buy out WCI Communities at $21 per share, which closed at $3.89 today down over 80% - Miami Condos in 2007, please tell me someone saw this coming besides me!!!
  3. Citadel Capital on Beazer Homes, down over 80% (they doubled up as it went down)
  4. Warburg Pincus on MBIA, down over 40%
  5. Legg Mason on nearly all of the big builders, down who knows how much - but an awful lot
  6. UBS on the MBIA and Ambac, down over 80% (recommendations)

I can go on. You can be assured these guys did what they thought was proper due diligence. The reason I bring these points up is because I have been told several times by several individuals that because XYZ "brand name" investor has bought into ABC company that I am bearish on I had better cover, or I don't know what I'm doing, or blah, blah, blahhhhh!!!

Well, I am not allowed to discuss my investment record, but I am fairly open with my opinions on my blog. Use your head and read through the blog and you will see that just because you are a "name brand" investor doesn't mean that you are right.

No, I am not Rolex or Cartier, but there are many other ways to tell time. Timex and Seiko do a damn good job as well, not to mention Joe's Watch Making Company. If you are the type of person who will pay $150 just to have the latest pair of Air Jordans, then you probably will not get the maximum benefit from this blog. In order to get the most of the research I release, you need to realize that many higher end investors tend to pull their analytical staff from the same pools, thus although Goldman may be thought of as gold, I believe they are simply benefiting from the fact that they did what they were suppose to have done (hedged) while their competitors (for some arcane and unimaginable reason) did not. That doesn't make Goldman impressive, it makes their competitors less than par.

When interviewing analysts, I came across a few who did work for a big hedge fund on Beazer for  potential equity investments. I warned them about the folly of such, and voila!

So, to make a short story long - no, I don't think a company is automatically a "no go" because a "name brand" took the opposite position. If I had that mentality, I would have lost out on the profit to be had taking the opposite side of all of those other "name brands" listed above.  We all make mistakes, and I know my turn for a big mistake is coming up soon, but until them, or even after then we all need to keep in mind that all investors are human and they all make mistakes, name brand or not.