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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (31515)	7/21/2008 4:38:03 PM
From: Madharry	Respond to of 78627

I guess I must be only one here who thinks it odd that ZION and WM which are on the list of most shorted stocks dont get to be on the protected list but GS who is not and recommend a short on WM in April is: April 11, 2008, 12:03 pm Goldman: Short WaMu Stock, Buy the Bonds Posted by David Gaffen Given the general reticence of analysts to issue “sell” ratings on shares, suggesting that investors actively short a stock takes a negative outlook to another level. Goldman Sachs analysts today told investors they should short shares of Washington Mutual Inc. wm_art_200_20080411115854.jpg Shares of Washington Mutual have declined of late (WM, last 3 mos.) However, they offset that position by recommending buying the company’s bonds. Whereas the recent capital-raising activity dilutes the shareholders, it helps bondholders worried about the balance sheet. Some of the $7 billion raised came from convertible bonds, which convert at a price lower than the current share price. Goldman analyst James Fotheringham estimates that the struggling lender should trade at a value equal to its tangible common equity which they estimate at $9.84 a share; the stock is currently at $11.38 a share, down a few pennies on the day. He estimates the company has $17 billion to $23 billion of embedded losses in its mortgage portfolio — of which just $3 billion has been absorbed. However, in the same note, Goldman credit analyst Louise Pitt suggests buying the company’s bonds and credit-default swaps, saying both indicators trade at levels wider than their peers, particularly following the raise of $7 billion in capital — including $5.5 billion in convertible preferred shares — to shore up the balance sheet. The convertible shares can convert at $8.75 a share. “The $7bn of new equity capital is a clear positive for bondholders,” she writes. “We expect the convertible to become common equity later this quarter, though we believe there is still a small risk that shareholders do not approve the dilution.”