The Sax Angle

Paulson Calling For A Greek Default

Posted on 15. Feb, 2012 by Wilensky.

According to Paulson & Co., a hard default by Greece could spell economic disaster of unprecedented proportion along with the breakup of the Euro.  In his 2011 recap letter to clients, he estimates $117 billion will be needed to recapitalize banks and satisfy other monetary needs.

Paulson & Co.:

“We believe a Greek payment default could be a greater shock to the system than Lehman’s failure, immediately causing global economies to contract and markets to decline,” the hedge fund said in the letter, a copy of which was obtained by Bloomberg News. The euro is “structurally flawed and will likely eventually unravel… …It seems likely that the pressure to keep the euro together becomes too great and it ultimately falls apart.”

While the firm identified the largest threat as being the overexposure of European banks who simply lack the equity to handle a crisis, they’ve had rough luck predicting the financial sector in the not-so-distant past.  2011 halved the fund’s assets, primarily due to a large stake in Bank of America and the fund sold out of their position sometime last quarter.  BAC has rallied close to 50% since.

via John Paulson Says Greece May Default, Spurring Euro Breakup – BusinessWeek.

Sallie Mae: Fees the Unemployed, Then Deletes Backlash on Facebook

Posted on 06. Feb, 2012 by Wilensky.

Nominal fees targeted at the demographics who will feel them most simply don’t work.  Bank of America thoroughly illustrated this concept with the short-lived monthly fee on their debit cards, resulting in a plethora of negative press and a number of former clients transferring assets to credit unions.  So why did Sallie Mae think applying a $50 fee to unemployed borrowers would work any differently?  Following BAC’s footsteps and a 100,000 name strong petition, Sallie Mae restructured the fee and now applies the money toward repayment of the loan.  Damage being done however, several people chose to speak out on the lender’s Facebook page.  Comments were deleted minutes later.  The comments can be seen here: Sallie Mae Censors Social Media.

John Paulson’s 2011 Hedge Fund Performance

Posted on 11. Jan, 2012 by Wilensky.

John Paulson’s 2011 Hedge Fund Performance

Despite a rather disastrous mess of 2011, Paulson has managed to keep redemptions down to just 8%..  An impressive achievement nonetheless, but is it due to belief in the strategy or belief in the brand?  Either way, his performance is a good illustration of how timing can cause even the soundest convictions to run awry.  Don’t forget the importance of a solid hedge when dealing with a timely trade..

The numbers are in for John Paulson’s Paulson & Co. The hedge fund finished 2011 with depressingly low returns reports the New York Times.

Paulson’s Advantage Plus fund finished the year down 52.5%, while its unleveraged Advantage fund fell 36%. Paulson’s other funds did marginally better. Its Recovery fund, which uses a macro strategy, dropped 28% in 2011. Paulson’s credit fund finished the year down 18%. The best performing hedge funds in the Paulson & Co. stable for 2011 were the Paulson Partners fund, which ended the year down 10%, and its gold fund, which lost 10.5% in 2011.Paulson’s problem was a combination of poorly timed bets, like the ones he made on Bank of America (BAC) and Hewlett-Packard (HPQ), and over exposure. After all, Paulson’s Advantage Plus was down 47% through the first nine months of the year. Paulson owned his error, telling shareholders that he made a mistake and should not have been running so exposed without the proper hedges in place – but, then, he over-corrected several positions, missing out on the October raly as a result. For instance, he reduced his position in American Capital (ACAS) the last week of September but the stock’s share price swelled 27.19% during the month of October.

via John Paulson’s 2011 Hedge Fund Performance.

Bank of America Blows Past $6 as Financials Surge – Stocks To Watch Today – Barrons.com

Posted on 05. Jan, 2012 by Wilensky.

Bank of America Blows Past $6 as Financials Surge

Bank of America (BAC) has recently displayed a strong reaction to headlines, especially having dipped below the $5 handle just over a week ago.  Today saw a similar instance where the bank posted a 8.6% gain during market hours based on…  nothing??  Now the far reaching rumor of The White House’s supposed trillion dollar bailout plan could certainly be considered a catalyst for such a strong upward move, but that would suggest that such a plan would be of benefit to the Bank.  When an institution’s source of income is from the premium they receive on the money they lend, how is stifling that cash flow considered a positive action?

By Avi Salzman

On a very mixed day for the broader market, big banks have suddenly begun to pop, led by Bank of America (BAC).

It was a little less than a month ago that the megabank’s stock dipped under $5 per share, but today it has climbed safely back over $6, and was recently up 7.3% at $6.23. One reason could be that Citigroup analysts held fast to their Buy recommendation on the stock today. In general, analysts have grown slightly more bullish on the sector with the turning of the calendar. Most famously, Barclays analyst Jason Goldberg warned investors this week that it’s riskier now to not own banks than to own them.

The sector’s rise is surprising in part because European banks are trading lower on pessimism about the debt situation in the Euro Zone and their increasing reliance on the European Central bank. Indeed, not all big banks are faring well today. Citigroup (C) is up 2.1% but Goldman Sachs (GS) is off by 0.3%.

via Bank of America Blows Past $6 as Financials Surge – Stocks To Watch Today – Barrons.com.

27 Out of Favor Stocks That Hedge Funds and Analysts Love

Posted on 26. Apr, 2011 by Insider Monkey.

10 Stocks Wall Street Analysts Are Insanely Bullish About

Posted on 21. Apr, 2011 by Insider Monkey.

A recent study by Da and Schaumburg published in the Journal of Financial Markets shows that Wall Street analysts can successfully determine mispriced stocks in a given industry. This doesn’t mean that their buy and sell recommendations will yield abnormal returns. It means when analysts think a stock is undervalued relative to its peers, it will outperform them. When analysts think a stock is overvalued, it will most likely underperform its peers.

40 Stocks Wall Street Analysts Are Insanely Bullish About

Posted on 28. Mar, 2011 by Insider Monkey.