Long and Short Ideas Today, August 20 2008

According to Bloomberg on August 19, Goldman Sachs Group Inc (GS). analysts led by William Tanona slashed earnings estimates for banks and brokerage firms and recommended that investors buy shares in Morgan Stanley(MS) while selling Citigroup Inc(C). William Tanona increased loss estimates for many of its peers, and warned the financial crisis is far from over:

"We believe a major recovery is still a few quarters away, as we anticipate additional asset sales and write-downs in coming quarters throughout the financial services sector."

Tanona trimmed Q3 EPS estimates for Lehman (LEH) (from +$0.68 to -$2.75!), Morgan Stanley (MS), JPMorgan (JPM), Merrill Lynch (MER) and Citigroup (C). He suggests clients sell Citi, and buy Morgan Stanley (MS) - the strongest positioned broker.

According to Barron's, Eric Sprott, the CEO of Sprott Asset Management, is a bull on energy, and a bear on nearly everything else. Sprott said that many coal stocks have had huge rallies, and takeovers of coal companies will provide plenty of opportunities for investors. For example, Alpha Natural Resources (ANR) has already agreed to be acquired by Cleveland-Cliffs (CLF), but there's a rumor that ArcelorMittal (MT), the world's top steel company, might make a bid.

He said, "There's hardly a financial name that we aren't short". He shorts Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Goldman Sachs (GS), Merrill Lynch (MER), Lehman Brothers (LEH), Morgan Stanley (MS), SunTrust (STI), Wachovia (WB), Washington Mutual (WM), Capital One (COF).

Sprott believes house prices will fall further. While Gold will appreciate from here in any currency. He buys gold and silver bullion for about 25% of their funds.


Related Posts :

1. Gold Stock's Profit and Margin Charts
2. Valuations are The Key to Long-Term Returns
3. There’s Never Been A 300-Point Rally in A Bull Market
4. US Stocks are Still Overvalued
5. Short Ideas Today, July 23, 2008
6. Regional Banks Collapse Snow Ball Seems to Continue Rolling Downhill
7. Short Suntrust Bank, Inc. (STI)

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