Moore Looks at Bank Liquidity

Louis Bacon’s Moore Capital was among the managers with significant positions in big banks when JP Morgan Chase disclosed its several billion dollar trading loss and  the stock fell. Moore held  Goldman Sachs, Citigroup, Bank of America as well as JP Morgan—with nearly $300 million in the latter.

The general rationale for buying banks was that they are oversold, nice and cheap. After the large loss, does the argument still hold? Probably yes, but subject to a caveat.

An analyst from Moore asked Goldman Sachs about its various pools of capital. Are there other pools? And what about the additional collateral necessary for central clearing of derivatives, required by new regulation? Goldman says it has plenty of liquidity, mostly in cash and US government bonds.

Between the European crisis and the JP Morgan loss, liquidity appears to be front and center again.


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