Longs and Shorts

Longs to consider:
MMM
DHR
WAB
UNH
JNJ
WU
Shorts:
NVR
RIMM
GS

Of the longs, many are industrials with the exporting/infrastructure theme intact. They are cheap enough that even if the overseas demand slowing scenario occurs, for the long-term [say 5-10 years] they should do quite well. WAB leverages Buffet's railroad theme, but at a global level; it competes in a duopoly, so perhaps there is more of a moat in a single railroad, but we would trade it gladly for the global leverage/lower reliance on US trade flows. UNH is a health insurer that is incredibly cheap - even if you don't see huge growth, its priced to not grow at all.
WU is just amazing - the only thing we can complain about is its price. Add on dips below $20.

The longs are all overpriced relative to our outlook for housing (ie it will suck for at least another 2-3 years, it is priced for a Q3 recovery), investment banking (longer decline in finance business in our view vs a 2-3 quarter decline priced in) and of course the correlation between housing/finance/domestic US consumer and the number of blackberries sold.

Even solid companies are restricting who they give balckberries to, and everyone is trimming their middle and back offices along with reducing front offices significantly. Look at it another way - at the peak there was about $1 trillion in excess mortage production - loans that never should have been made. The finance industry collected about 2 points on each par amount originated - so about $20 billion. That $20 billion paid for a lot of things - all the extra people the loan originators, bond insurers, rating agencies, dealers, and ABS funds hired to specialize in non-agency RMBS, CDOs, and so on; also all their blackberries. Even at $250k per person, that is 80,000 people.

Then think about all the personal services these people (living mostly in NY/CA urban areas) employed....they probably had a much higher multiplier effect than the average person.
So while $20 billion is only 0.2% of GDP, the multiplier means it could mean as much as a percent gone forever (or at least until the next bubble comes along). For the economy as a whole, it is significant but not huge. For certain sectors, it is HUGE.

Additional notes on GS: pay attention to their level 3 assets. Last quarter the increase in value in these assets was a huge percent of their net income. They are priced as the ultimate beneficiary of the crisis - the Ibank that will pick up what all the losers lose, at a hefty premium to book value compared to the rest, with the traders that never lose a bet or make a large mistake.
Guess what the trader that made and won the big bets shoritng ABX there did recently?
He left and went to start his own fund...