Wednesday, September 17, 2008

Gold is your friend

The only good news seems to be gold and a nearness to the bottom. The S&P is nearing the point where it may make sense to move out of cash and into a S&P index fund. I haven’t done that yet, but I’m thinking about it.

In the meantime I keep buying WWY and the market has given me even a better deal as it now is back to $78. That’s $1.50 off the price of two days ago and $2 at closing. Financing is locked in, the Euros have approved it, and the American regulators can’t be too far behind. The deal should get done this fall. The main benefit is that it’s safe. I won’t get rich off this deal, but it won’t go down like the rest of my long portfolio.

The Bud deal has also developed a big spread, but it has more hair on it than WWY. InBev says the financing is firm, but you do have regulatory risk. I’m staying away from arbitraging this asquisition.

Every two or three minutes I reassess my position in National City. I’ve become a big believer in this bank holding company and have acquired my stake at a few pennies over $4. But it now trades for quite a bit less.

Yesterday I listened to their Chief Credit Officer on a panel discussion on loan losses and he was articulate and knowledgable. I was heartened. Today I reviewed the Q2 balance sheet and reminded myself that they have a very small amount of fed funds and repos that need rolling. The holding company has enough cash to fund all debt payments for several years. So liquidity should be fine; and the Fed is standing by in case the press scares depositors into a run on the bank. I also reconfirmed that they have a very small investment portfolio and it isn’t toxic. Their fannie/freddie preferred exposure is less than $10M. I don’t know their swaps/derivitive exposure and i worry about that.

Lower short term funding rates helps NCC and lower refinancing mortgage rates should help mortgage and heloc customers. The heloc refis could really be of benefit to NCC. If a lot of mortgages/helocs get refi’d to the government, even with a haircut, that starts putting the balance sheet in order.

Anyhow, I bought more today and continue to be either really smart or dumb as dirt.

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