You have to be kidding me?
As the share price goes lower and he is short the value of the position grows and thus the % of holdings to total nav of fund grow.
As it goes closer to $0 the odds of it growing much more in value become less and thus there is much less risk/reward to hold the position.
I would guess Ken has covered a large portion of the position when it got to the $4 range, there was limited gain opportunity of $4 max, that is not good odds to hold out for when you already have massive gains in the trade.
He very well could add to the position if it moves to the $8-$11 range on any crazy spike it might experience. At the end of the day the company is worth $2 max, and in all likelihood it will be worth $0 as the loan book is toxic and will see $40+ billion in writedowns which will turn the debt into junk and the bank will have so many lending restrictions they wont be able to make any money, depositors will grow nervous causing their capital base to errode as people take their money out and move somewhere else more secure.
Nobody will want to touch their ABS offerings and that will cripple their liquidity.
NCC, WM, all go under at the end of the day, by 2009 banking landscape will look completely different than it looks today.
Nope, far197 is right. That was a good catch by him. But you are right in a way also. Let's go back to the 3/31 portfolio. The total net assets were $6,086,048,842. Of this amount there was a ($329,600,000) liability for the value of the WM short position. This represents -5.42% of the total net assets. I went as far as recreating the schedule of investments on a spreadsheet using number of shares multiplied by closing prices. I got this schedule from the SEC filing. The percentages in the filing do not agree with what is published out there by many if not most of the online sources. I think I know how these other sources got -5.72% for the WM short and the percentages for the other holdings, and I do not agree with that calculation. I will not go into that in this post. So going back again to the 3/31 portfolio. There were 125,770,796 shares outstanding at 3/31. The NAV was $48.39. Assuming nothing changed except the stock price of WM, the total net assets as of 7/17 would have been $6,255,968,842 with a liability for the WM short of ($159,680,000). This short position is now only -2.55% of the total net assets. And the theoretical NAV would be $49.74. So while the percentage of this position to total net assets got smaller, like you said "the larger the value of this position" to total net assets, i.e. it has contributed more to unrealized and/or realized gains in the fund, if that is what you meant by “value”. After the big surge in WM on 7/18, the total net assets would have dropped to $6,226,208,842 with an increase in the liability to($189,440,000). This short position is now only -3.04% of the total net assets. The theoretical NAV would be $49.50. This theoretically affected the NAV on 7/18 by -0.48%. I also did an analysis of the 3/31 portfolio at 6/30 and 7/18. I found out some interesting stuff which I will post in another thread, either tonight or sometime tomorrow. Regards, Mike
You are right. You must have missed my earlier post admitting my mistake when far197 caught it also. I am trying to post another message further explaining why I was originally to hasty in my post and why you two are correct. I am having trouble posting things now for 2 days. I do not know what gives ??? I am going to try again today. I may even have my brother try and post my message from his computer. We will see.
" . As this position grew more profitable, all things being equal, it would have become a much larger percentage of the fund."
Mev, it works different when you are SHORT something. If you short a stock and it goes down, it becomes a smaller part of your portfolio. That's what I noticed in 2002 when I actually shorted a lot of stocks that went down, it's a lot easier to compound stocks you are long and make big gains, but when you are short something, it just becomes a smaller part of your portfolio, UNLESS you short more on the way down.
>>> As the share price drops, assuming the the same number of shares, it's relative percentage of the fund becomes smaller not larger
Except if he's SHORT on the stock, then as the stock price drops, the LARGER the value of this position.