As banking stocks suffered through one of their worst days ever last Tuesday – Citigroup, Bank of America, Wells Fargo, US Bank, JPMorgan Chase and others fell more than 20 percent – not every investor was taking their lumps.
A group a savvy hedge-fund operators – who discovered the depths of the banks’ mortgage problems last August and have been shorting bank stocks since – made hundreds of millions of dollars that day and find themselves up as much as 60 percent so far in 2009.
John Najarian, founder of OptionsMonster.com, told The Post that based on what he saw in trades going long in puts on banking stocks, which act like a short, there was at least $500 million made on Tuesday alone.
One hedge fund titan reportedly sitting pretty is New York-based Jim Chanos, who, according to investors in his Kynikos Associates short-only fund, had as its largest position a short in Wells Fargo this summer, which on Sept. 19 hit its 52-week high of $39.80.
The stock has cratered since then, closing Friday at $15.87, down about 60 percent. The sharp-eyed trade last year helped Chanos’ $5 billion Ursus fund finish 2008 up 62 percent gross, according to a letter to investors from the fund reviewed by The Post. When reached last week, Chanos refused to comment on whether the fund’s largest position was in Wells Fargo.
Chanos told The Post this week that the billions of dollars in bank losses are really a symptom of banks massaging the balance sheet – that the losses really should have been accounted for earlier.
“People still don’t believe the numbers being reported,” Chanos said of bank announcements this week. “If we don’t have honest, real-time accounting how can investors trust our public companies.”