These blog posts originally appeared on RealMoney Silver on Oct. 1.

First Data Deal Equals More Credit Crunch -- at 7:42 a.m. EDT

On Thursday the credit and equity markets were relieved to learn that the First Data loan deal went through with a better-than-expected price of $96 from Credit Suisse ( CS) and Citigroup ( NYSE).

That news item seemed to confirm that the Fed was successful in reversing some of the seizure in the credit markets, and that, in general, the improvement in equities was rational and, in particular, the improvement in financial stocks was justified.

By contrast, I believe that there is less than meets the eye to the "tell" associated with the First Data transaction, and I shorted Citigroup and expanded my short book further after learning the information that follows.

According to conversations I have had with several buyers of the First Data loans, it appears that the investment banks were only able to sell the merchandise at the $96 price by offering very attractive financing terms to a number of hedge funds that bought the loans (read: lower interest charges). I suppose those hedge funds will mark the loans "to model," ensuring a positive carry and levered returns.

In other words, Credit Suisse and Citigroup essentially transferred or laid off a portion of their First Data liabilities from KKR Financial Holdings ( KFN) to the participating hedge funds.

Although the world's equity markets are signaling a substantive improvement in the fluidity and liquidity of the credit markets, that optimism appears to be overstated -- at least based on the structure of the First Data loan offering.

Although investors want to breathe a sigh of relief, the belief that the First Data deal may have signaled a return to health in the leveraged loan market appears mistaken.

Perhaps this helps explain why Citigroup's shares are having such a difficult time gathering steam.

My view remains the same: The major money center banks remain value traps.


Short Community in Disrepair -- at 10:31 a.m. EDT

As the DJIA eclipses the 14,000 level at the start of the final quarter of 2007, the ever-smaller short community is in disrepair.

Solid and substantive arguments of economic/market concerns lose credibility in a market that seems to be suspending disbelief (again!).

That said, new shorts that I have initiated recently include Homex Development ( HXM), BlackRock ( BLK), AllianceBernstein ( AB) and selected gambling companies.

Homex's largest competitor in Mexico, Geo Group ( GEO), cut sales and earnings estimates last week. As far as my BlackRock and AllianceBernstein shorts go, I believe that we have seen a secular peak in ROI for asset managers, and I expect declining inflows and net asset values. Finally, gambling stocks look extended (some up 70% over the last few weeks); they're priced to perfection and have accelerated insider selling.


A QQQQ Short -- 10:35 a.m. EDT

In the ludicrous forecast category, the Nasdaq will close lower on the day.

Already, several of the speculative highflyers are faltering.

I have doubled my PowerShares QQQ ( QQQQ) short today.

At time of publication, Kass and/or his funds were short Citigroup, Homex , BlackRock, AllianceBernstein and PowerShares QQQ, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.

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