One of the oldest rules in investment is that 'When a good management finds itself running a bad business, its the reputation of the business that survives'. Legendary US investor Kirk Kerkorian has just proved he is no exception. Back in April, he spent $1bn on buying a 6.3% stake in Ford Motor Co, and publicly supported its turnaround plan. Today, his stake is worth around 1/3rd of its initial value, and he has begun to sell. If Kerkorian is giving up, then this suggests that Ford may not have long to survive in its present form.
Meanwhile, Joe Chang, editor of ICIS Chemical Business, has alerted the blog to Andrew Lahde's intriguing 'farewell letter' . Lahde's hedge fund rose 1000% last year on bets against subprime, and he ironically 'thanks' top people at AIG, Bear Stearns, Lehman Bros, and in the US government, for "making it easier for me to find people stupid enough to take the other side of my trades". He closes, in the manner of an Academy Award winner's speech, by adding that "the endless list of those deserving thanks, know who they are"!
The fact that Kerkorian is giving up, and Lahde can't find any more 'down' bets, might seem to mark a turning point for the US stock market. Certainly this is the view of legendary investor Warren Buffett, who has just advised buying US stocks on the basis that "bad news is an investor's best friend", as "it lets you buy a slice of America's future at a bargain price."
Normally, as an old-fashioned value investor, the blog would want to agree with Buffett. But for the moment, it prefers to sit on its hands. It worries that Ford may not be the only company in the 'real economy' whose existence is under threat in the New Year.