Prior to and just after filing for bankruptcy, Northwest Airlines seemed to offer a short opportunity. A friend had me double-check his balance sheet analysis and I ended up selling myself on the idea. The common shareholders would be wiped out and the stock was trading around $1.25. We got the short on. The stock tripled or quadrupled. I started quoting Keynes (attributed) as we threw money at the monster:
The market can stay irrational longer than you can stay solvent.It worked out, the stock went to zero and I kept quoting Keynes:
“It is the one sphere of life and activity where victory, security and success is always to the minority and never to the majority. When you find any one agreeing with you, change your mind...."There a a few lessons to take away fom this adventure:
1) If your timing is wrong you had better be right in your analysis.Here's the headline story, from MarketBeat:
2) It is really, really good to have a friendly banker.
3) Keynes talked a lot.
We’ve previously pondered the mysteries of AIG shares, as well as the all-important question of whether they’re worth anything.
Today, Credit Suisse analysts weighed in on that subject and others via a note downgrading AIG shares from neutral to underperform.......Of course, all of this may very well be academic. Those speculating on AIG shares probably don’t really care whether there is any fundamental value to the equity, as much as they do about just finding someone to buy it for a few pennies higher.