Friday, December 21, 2007

Super-SIV Fund Abandoned: Very Good News

Why is it good news? It simply means it is no longer needed.

At the request of Hank Paulson, Head of The Treasury Department, Bank of America (BAC), Citigroup (C) and J.P. Morgan (JPM) had been working to set up the SIV fund since September. It was proposed to buy assets from so-called structured investment vehicles (SIV's), removing the direct risk from the banks.

The fact that the banks feel it is no longer needed is very good news indeed. It means the write downs for the SIV's at the institutions can't go much lower. These things ARE worth something. Citigroup's decision to put them on the balance sheet also is a very good event. They will provide clarity.

I have been stumping for financials since about October. They will be the big winners next year and our next purchases will be in the sector again. Currently we own Citi (C), Wachovia (WB) and Goldman Sachs (GS). Goldman is an automatic buy under $200, Citi under $30 and Wachovia under $39.

Our next purchases will be a troubled mortgage lender and a Buffett favorite.

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