Financials

The market is in correction, erasing some earlier gains. The US market is down amid the largest decline in Asian markets in a decade. The financials are being hit hard as Greenspan pointed out that our economy could be near a recession. Financials are also down due to traders focus on the defaults of subprime mortgages and where all of the exposure is (via borrowings, MBS, structures). Lets look at where our holdings are: Citi: Chuck Prince stepped up and brought in a new CFO. Poached from American Express, Gary Crittenden is on the hot seat from day one, as he needs to control cost and balance the firms massive product/services line with favorable return to shareholders. Coming from American Express, a used-to-be conglomerate that has shed itself of unwanted business units, some speculate the Crittenden hire as one that is supposed to unravel the empire Sandy Weil built. Nothing is set in stone yet, but investors will be paying extra attention to expenses in the coming quarters. Merrill: Merrill is down right now due to global market decline. There is nothing too new out about them right now. We have down extremely well with this position and for a portfolio of our size, I think MER is the most balanced firm out there with regard to diversified profitable businesses. I would say that aren't the best IB, not the best Private Bank, and not the best Capital Markets house - but together they perform in outstanding fashion. AIG: AIG recently acquired the assets of a middle-market PE house. Other than that, they still are well above our stop-loss point, and I kind of like the non-broker financial play. Until next week, Rich