If you say something is or is not going to happen, you’d better be right…
AIG’s (AIG) Martin Sullivan became the latest “we will not need to raise more capital” casualty tonight being replaced by former Citigroup banker Robert Willumstad, who was already AIG chairman, effective immediately..
Sullivan joins Merrill Lynch’s (MER) Stanley O’Neal, Citigroup’s (C) Charles Prince, Bear Stearns’ (BSC) James Cayne, Ambac’s (ABK) Robert Genader, MBIA’s (MBI) Gary Dunton, Wachovia’s (WB) Ken Thompson and Lehman’s (LEH) Erin Callan.
We’ve been having this discussion here for pretty regularly since April and for some reason, the assurances are still being made. Up until just days before she was demoted, Lehman’s Callan was still out making assurances about the company I really think only she believed.
We aren’t talking about missing EPS targets by by a few percentages, we are talking about saying your capital position is sufficient and then going out and needing to raise the equivalent of 30% of your market cap only weeks later, in the case of Lehman. It just cannot happen.
Why are the shorts winning? Because the actions of the above crew give the inclination that even they do not know how bad the situation of their company is. If those people with the most intimate knowledge cannot get a handle on it, then the people telling us it is really bad must be right. Management keeps telling us things are under control when it clearly isn’t. That doubt and the fear it causes on the part of investors will inevitably lead to an negative overreaction in their outlook.
If the bosses tell us it is going to be “x” bad the shorts will have a quick victory but when it turn out to only be “X” bad, that is it, the party for them is over. They will exit the shorts and the longs can start buying in. The longs will not buy in now because they do not believe the bosses and the shorts can keep piling it on.
One final thing. Please stop whining about “short sellers”. It is annoying and useless. How about just getting your act together and get a handle on what is going on around you…… novel idea I know but it would actually work.
Disclosure (“none” means no position):Long C,WB, None
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