30 more stocks added to no-short list / Inflation vs. Deflation
This morning, the NYSE added 30 new companies to the no short list. Here's a list of the new additions with a few companies highlighted my myself:
GLG GLG Partners
GE General Electric Co.
OCN Ocwen Financial Corp.
KBW KBW Inc.
GFG Guaranty Financial Group Inc.
MFG Mizuho Financial Group, Inc.
FMR First Mercury Financial Corp.
STC Stewart Information Services Corp.
FCF First Commonwealth Financial Corp.
MTB M&T Bank Corp.
DFS Discover Financial Services
BMO Bank of Montreal
TD Toronto Dominion Bank
CM Canadian Imperial Bank of Commerce
FMD First Marblehead Corp.
BBV Banco Bilbao Vizcaya SA
CIB BanColombia SA
LM Legg Mason, Inc.
NFP National Financial Partners Corp.
AXP American Express Company
CIT CIT Group Inc.
GM General Motors Corp.
HIG The Hartford Financial Services Group
ADS Alliance Data Systems Corp.
ALD Allied Capital Corp.
RAS RAIT Financial Trust
DRL Doral Financial Corp.
FSR Flagstone Reinsurance Holdings
MCO Moody’s Corp.
COF Capital One Financial Corp.
A few comments:
Wow, General Motors was added to the list. Why? I suppose that it has a stake in GMAC, but still.
As a former shareholder who escaped before the company completely imploded (but not without some pain), I find the First Marblehead addition interesting.
Discover and Capitol One are two companies that I have shorted myself in real life over the past year.
Moodys is an absolute joke. The credit ratings agencies have not been punished nearly enough considering the fact that they were rating all sorts of garbage AAA when it clearly was not. They and S&P have been doing a TERRIBLE job over the past several years at assessing risk. The fact that they essentially have a monopoly has prevented these terribly run companies from getting hammered nearly as much as they should have. If my company (which is private) had made as many mistakes as they have over the past several years our clients would freak and we would be forced out of business.
Legg Mason is an absolute mess as well. I don't know what it is, but Bill Miller seems to have lost his mojo. I was questioning his stock picking ability in this sort of environment already, but his disastrous investment in the GSEs sealed the deal for me. Without a cleanup hitter like Miller, Legg Mason is just another investment management company.
I personally own GE and given the enormous size of GE Capital I can see why it was added to the list when so many other banks have been. I'm not saying that the short ban should exist at all, in my opinion it absolutely shouldn't, but since it does they might as well throw GE on there as well.
There are basically two camps of people out there right now. I call them "Inflationists" and "Deflationists."
The Deflationists believe the fact that liquidity is drying up because that banks will be unbelievably tight with credit going forward, that the likely death of the type of 30-to-1 leverage that so many were employing over the past several years, and a massive global economic slowdown will suck the life out of the prices of all assets.
Inflationists on the other hand believe that Ben Bernanke, who has studied the causes of the Great Depression in great detail and has talked about how Japan should have "dropped money from a helicopter" to prevent the deflation that it experienced, will join forces with Hank Paulson, who will do everything within his power to protect his Wall St. friends, to completely flood the United States with money and lower the value off the U.S. dollar to prop up asset values. This, combined with the economies of foreign countries, particularly emerging markets, which will continue to grow at a nice clip will keep the demand for and prices of natural resources fairly high.
I am in the latter camp. The Federal Reserve and the Treasury have way too much power and it is completely within their ability to pull the rug out from under the dollar if they want to. Our out of control government spending and massive current account deficit probably would have eventually steered things in that direction anyhow. Our Friends Hank and Ben are just going to speed up the process.
Which camp are you in and why?