The S&A Digest: Layoffs on Wall Street

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(Top 10 highest-returning open positions across all S&A portfolios)

As of 06/17/2013

Layoffs on Wall Street... Reverse mortgages... Tweedy, Browne says buy... Blackstone calling the bottom... Ackman's new position...

Goldsmith comment: Dan's traveling, so I'm handling The Digest.

In an effort to trim staff, Wall Street has gotten creative... Goldman Sachs has an "accelerated analyst program." The bank told analysts in its two-year program that they are now on a one-year track.

But American Express may have one-upped Goldman... It's telling employees to get each other fired. According to DealBreaker, "an e-mail went out to all AXP employees that said, paraphrasing, 'As you know, we're in a rough economic environment... so we're launching a campaign called Speak Up and Speak Out, so that you can report on each others' violations without reprieve.'"

Private-equity behemoth Blackstone Group announced earnings yesterday, and the firm says, "We're near a bottom." Blackstone started betting against subprime in 2006, while most investment banks were still poisoning their balance sheets with the debt. The firm started covering its short bets earlier this year, and now it's going long through its "fund of funds" and its credit hedge funds.

Blackstone also bought a minority stake in Bayview Asset Management, a mortgage financing and servicing business that manages a $2 billion mortgage fund. Blackstone joins Lone Star in bullish bets on the mortgage market.

Value investor Tweedy, Browne released its second-quarter letter, and the results are dismal. Traditional value stocks (companies that sell at low price-to-book and price-to-earnings multiples) have been hammered, but Tweedy says its portfolio has "rarely been cheaper than it is today." The firm is urging investors to add to their accounts.

Tweedy also gave away a few interesting stock picks... It has been buying Telecinco, Spain's largest television production company. Telecinco trades at four times pretax earnings, yields 17%, and has net cash on the balance sheet. Tweedy also owns Medikit, a Japanese medical device company trading at 1.6 times pretax earnings, yielding 2.5%, and holding net cash on the balance sheet.

Pershing Square Capital Management, Bill Ackman's hedge fund, announced it owns an 8.8% stake in Longs Drug Stores and may hold talks with the company. The fund said it also bought "total-return swaps" (which allow you to benefit from capital gains without owning an asset) to bring its exposure to about 15.4%. Don't take Ackman's huge position as a buy signal. He's made billions shorting MBIA, Ambac, Fannie, and Freddie, but his long positions, including Borders and Target, have been lacking.

New highs: Baxter (BAX), Barr Pharmaceuticals (BRL), Anheuser-Busch (BUD), Covance (CVD), Wal-Mart (WMT).

We take a momentary break from the venom to ask for your help today...

Dr. David Eifrig is developing our newest service, Retirement Millionaire, and he needs your input. In particular, he wants to know your experiences with reverse mortgages. Have you ever done a reverse mortgage? Have you thought about it? We'd like to hear both success stories and horror stories. Please be as specific as possible. Send them all to feedback@stansberryresearch.com.

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Regards,

Sean Goldsmith

Baltimore, Maryland

August 7, 2008

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