Enterprising Investor Forum

After the Sovereign Investment Funds recent interest in US banks, Joseph Lewis, has bought more Bear Stearn shares taking his ownership stake to 9,5% but most commentators have reacted by saying that his was not a very smart move as we still haven’t heard all the bad news in the financials.

Goldman has just raised 4th quarter write-down estimates for:

• JPMorgan from 1,7 billion to 3,4 billion
• Citi from 11 billion to 18,7 billion
• Merrill from 6 billion to 11,5 billion

Are the commentators right or is it Lewis – on of the world’s richest men and a very successful businessman/investors?

The truth is probably somewhere in the middle. We feel that the market commentators are taking short-term view, whilst Lewis will definitely be sitting on a healthy profit in a 2-3 year horizon.

Whilst others where enjoying their Christmas dinners, Warren Buffett was finalizing his latest deal! And in true Buffett style, no consultants and no studies.

Marmon Chairman Thomas Pritzker told the NYTimes “…we delivered a phone book-size document describing Marmon, literally at his plane. He read it on the plane going back to Omaha. He landed and called … we have a deal.”

Berkshire will buy a 60% percent stake in Marmon Holdings which is the industrial holding firm owned by the wealthy Pritzker family, for $4.5 billion with the goal of eventually owning the entire firm.

Buffett is scheduled for a live interview on CNBC at around 08.45 on Squawk Box.

Can you believe that the corporate default rate has actually decreased in November? This CNBC video is extremely interesting. It actually talks about the default rate history and that even if worst case scenarios turn out to be true, we will still be under the historical average default rate.

Video link: here.

Enjoy!

Markets remain very volatile, especially in light of looming downgrades for bond insurers and what people believe is a weakening economy headed for recession. Bond insurer ACA Financial Guaranty Corp. saw its “A” credit rating cut down Wednesday to non-investment grade “CCC” by Standard & Poor’s! Furthermore, reports confirmed that the level of foreclosures was up 68 percent in November compared with the same period last year.

Bear Sterns is expected to post first even quarter loss and Merrill is expected to announce another 7 million dollar write-down after having posted an 8,4 million one last month…

Today will definitely be another very interesting day. We continue to stay on the sidelines, nibbling on some small opportunities but mainly observing what is happening before re-entering the market.