We have all heard the story about the colleague (or student, in my case) who is brilliant at picking stocks that will perform badly and that everyone use as a living sell-signal. I wonder if the sovereign wealth funds (SWF) might be the Wall street version of this guy?
I mean, after half a year or so of analysis they suddenly decide that it is the right time to buy troubled banks such as Citigroup and Merrill Lynch. Is it just a coincidence that it is these megabanks that have attracted their attention? What about all the much smaller and less well known banks that have suffered in the markets lately? Wouldn’t it be more wise to scoop up a bunch of these guys instead and get diversification as icing on the cake? I suspect that these purchases are by organizations with too much money and too little experience and competence. ==> Short the stocks that the SWFs buy!
Also, I agree with all those commentators that like to stress the likely suboptimality of these players as owners of profit-maximizing firms. These governments are not exactly known as stellar-performers in running things. Basically, that these funds have a hidden agenda is a given. At least to me! ==> Short the stocks that the SWFs buy!
Finally, by providing ample rescue funds to badly run franchises the SWFs slow down badly needed reforms (it seems) in the target companies. This shouldn’t be good news to the rest of the owners. ==> Short the stocks that the SWFs buy!
