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Strategies & Market Trends : Value Investing

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To: Madharry who wrote (31974)	9/12/2008 11:59:08 AM
From: E_K_S	Read Replies (2) of 78574

This is a good article that outlines WM's survival options. Washington Mutual: In Troubled Waters By: Salman Friday, September 12, 2008 8:19 AM istockanalyst.com JPM has been studying their books since March. A spin off of some of WM's branches to JPM for more capital or the sale/transfer of WM's credit default swaps that are under water would make WM leaner and a survivor. Maybe the Fed steps up and underrights a portion of these credit default swaps with combined JPM and WM assets. From the article:"...The cost of protecting Washington Mutual's debt with credit default swaps rose to 32.5 percent upfront, plus 500 basis points annually, up from 30 percent upfront plus 500 basis points on Monday, according to Markit Intraday. That means it costs $3.25 million in upfront costs plus $500,000 a year to protect $10 million of debt...." ============================================================ Disclosure - I own 100 shares of WM in the IRA and was lucky to sell the bulk of my core position at $55 last year. I sold the last of my taxable holdings at $19. I think you are right in your evaluation of the potential Risk vs Reward of WM but at this point it is a bit too risky for me. (I almost bought some of the preferred hybrid shares). The value proposition is for a potential buyer to acquire some or all of WM assets. At this time, WM has very limited options and it will be the potential buyer that obtains fire sale assets at WM's expense. Those WM-PR are up almost 100% from Monday and the first dividend is due Monday September 15, 2008. My guess is that WM peels off some assets to JPM but it will not be a complete buy out. It should be a good deal for both parties and the WM preferred shares continue to hold their value. EKS (Edit - GE is acting as if they might have some toxic debt to disclose that Mr. Market is sniffing out)

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