Thursday, July 10, 2008

Bill Gross and Lehman

Earlier today an investor friend of mine shot me an email asking me if I was shorting Lehman based on the rumors. My response was no the easy money has been made. I had been short Lehman since November and covered several weeks ago and I was happy. There is no way to verify or not verify rumors. It's a fools game to get involved unless you have some advantage or the stock is really overvalued. I just watched Bill Gross interview (now several times) from this morning with CNBC and my opinion has somewhat changed. After watching the interview I believe Bill Gross had all kinds of signs of deception.

I am not going to explain it all now but at my previous job we have several days of training for tactical behavior assessment by former CIA interrogators. They run a consulting firm for financial investors called Business Intelligence Advisers.

Look a the first question, in my judgment he is honest and very forthcoming. The second question he completely failed to answer the question but was still very honest. Red flag. The third question cornered him. Right at 3:02 minutes he answered. One he still failed to answer the question but more importantly there is what BIA calls a huge cluster that developed. Movement of what are called anchor points and other non verbal clues that at the least he is not being forthcoming. The fourth question asked it again. In my mind this was less of a failure but still showed signs of deception.

You can call me crazy and nothing is a science but I would be willing to bet big that there is truth to this rumor based on what I saw in this interview with the previous training I have had. That is different from making money off it by the way. I showed an MBIA interview in the WSJ months ago that the CEO in MBIA was using deceptive behavior based on this exact methodolgy and sure enough that is exactly what happened.

Does that mean I am going to run out tomorrow morning and short Lehman? No. So Pimco is reducing risk with Lehman, does that really mean all that much? No What I am going to do is start watching the trading of this stock very close now and determine if I there is an opportunity there. I haven't watched the tape in Lehman in weeks and so I will start watching it and see if I like the tape from a short perspective. If Pimco is indeed pulling in exposure others will follow and that is where Lehman is in trouble.

As an aside even if Bill Gross was pulling all of his exposure there is no way he could come on national tv and say that. That in itself would destroy Lehman.

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