FDIC stealthily announces another bank takeover, Secrecy Continues

The FDIC dropped another ninja press release tonight, this one is about their takeover of The Bank of Clark County. Looks like this one will cost the FDIC (and taxpayers) $97 million, according to CNN Business. They’ve already dropped one after-hours bomb about a failed bank tonight.

Gosh… why would the FDIC choose tonight to release such negative stuff? We’re heading into a 3-day weekend, followed by the most-watched inauguration hoopla ever. Limited press-coverage, closed markets. This is prime-time when it comes to releasing horrific data. Only obsessed losers such as myself are scanning news feeds at that time. (see State Street’s earlier disclosure).

Or maybe the secrecy and deception is for our own good? The less we know about the situation, the better. Commoners don’t have the mental capacity to digest the type of data being hid from us. It’s clear that only elite investment minds like Paulson, Bernanke, and Greenspan are “on the level” to grok this stuff.

To be honest, I envy them. Oh, to be a fly on the wall during those bailout meetings. So many rational, unbiased, intelligent, open-minded, and ultimately accountable people in one room. It probably would have been too much, like staring at the sun. Sheer brilliance.

Yeah, it’s our tax dollars they’re playing with. But won’t it benefit all of us (excluding taxpayers and shorts) to adhere to the financial world’s “don’t ask, don’t tell” policy?

Remember: Capitalism is all about free and efficient markets. To achieve that, we need government intervention that meets three key criteria:

  1. Be Inconsistent – Pick favorites, give sweetheart deals, and always remember to bail out friends, family, and political contributors first. This will ensure the demise of that troublesome “invisible hand”.
  2. Bail Big – Massiver = betterer. Print money, discourage savings, encourage reckless capital investment. Don’t forget to destroy the middle class and any savvy investors who think the market’s overvalued.
  3. Delay, delay, delay! – Passing the buck is the rule. It’s hard to over emphasize this one. Only ensure viability for as long as it matters to the average idiot voter. If we’re lucky, another bubble will form soon. Then we can have our way with the taxpayer again. Yay.

Meet the new guys, same as the old guys?

I do believe that Obama is an incalcuable improvment over Bush. But his financial appointments don’t look great in terms of change. I don’t see any outsiders at all being brought on, or many economists with good track records. Shouldn’t that be part of the criteria for hiring? Knowing what’s going on?

Horrific: State Street discloses $5.5 billion loss

State Street (STT) just put out some gnarly news. It’s new, so I can’t find a linkable copy. Only seeing it on on Etrade when logged in, which is odd. The source is Dow Jones. Here’s a snippet of tonight’s release:

The Boston-based financial services company said that at the end of 2008, it had $5.5 billion in unrealized after-tax losses in its long-term portfolio of investment securities classified as available for sale and held to maturity.

They made the following statement at the end of 2008, which estimated a much smaller loss:

At the end of 2008, State Street said, “there were $3.6 billion of after-tax net unrealized losses associated with portfolio holdings of the conduits.”

Note the timing of this release. A Friday night, on a holiday weekend, after the close of after-hours trading, when only true losers like myself are obsessively analyzing the market and scanning for nasty pre-holday weekend news.

Looks like the loss was related to “stable value” type funds. I’m looking for more info and will post an update.

Note – The FDIC also chose this prime-time to announce the takeover of National Bank. Ugly, ugly, ugly. Releasing negative news before a long holiday weekend sucks all-around. It makes the whole system look dishonest and like they’re hiding something. A lot of something.

SPG owns 10 malls with Circuit City stores

It appears that Circuit City has 10 stores at SPG-owned properties. I added to my Simon Properties short today at $44.20. Circuit City’s bankruptcy will have a real impact on SPG’s revenue, and it’s just the beginning of corporate bankruptcies that could crush Simon.

When a store like Circuit City closes it’s doors, it affects ALL the stores around it and in the mall. Less traffic, less revenue, less rent, more defaults. I think SPG has a lot farther to fall (A LOT).

Side note – I also bought some AAPL at $81.86. This thing is dirt cheap.

The Best Short Mutual Funds

Picking a good short mutual fund isn’t easy. The 2003-07 bull market decimated most interest in them. During that period rational bears were curb-stomped by an irrational bull market. Government regulation hasn’t helped either. But, even though the markets are down 40% from highs, I still think these are worth consideration. I’m still holding these two bear funds, and think a re-test of last year’s lows is inevitable.

Prudent Bear Fund

Prudent Bear is a unique fund. For the most part it shorts U.S. equities, indexes, and futures. But they also have some long positions in gold-mining stocks, as a hedge against inflation and devaluation of the dollar. They also hold a few long positions in stocks they think are undervalued. But the vast majority of the fund is short.

Ownership change – it should be noted that Prudent Bear was recently bought by Federated Investors. The previous chief manager, David Tice is no longer directly managing the fund. But he will still be closely involved as the “chief portfolio strategist for bear markets” at Federated.

Fortunately, the new guys running the fund have great resumes: Douglass C. Nolan and Ryan Bend. Mr. Nolan previously worked for shorting-god Bill Fleckenstein’s fund, which reaped huge gains shorting equities over the past few years. The other manager is Ryan Bend, who is coming over with Prudent Bear, so having him and David Tice around should ensure that it doesn’t veer too far from the previous manifesto.

Grizzly Short

GRZZX is a pure short fund. They use a proprietary tool called the “Vulnerability Index” to find juicy short opportunities. I have no idea how it works, but it works. Grizzly is up 69% over the last year, and up 7.57% over the last 5 years. Not bad compared to the S&P’s -40.5% performance over the last 52 weeks.

Fundamentally, a re-test of  2008 lows seems inevitable. I think U.S. equities will go a lot lower in 2009. That said, the bailout-effect is an unknown, so it’s impossible to make concrete predictions. Do U.S. equities deserve a big smackdown? Yes. Will they get one? Maybe.

It’s important to realize that the stock market is now entirely dependent on how our government is going to intefere. Not if, or when. The question is how. I like to think that Obama will let markets correct more naturally than Bush did. But the pressure from voters/pumpers to artificially prop up equity/housing markets is extremely strong.

Disclaimer: This is NOT investment advice. Always talk to a professional when making investment decisions. Disclosure: I have NO affiliation or interest in any funds or securities mentioned in this post.

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