Asia's sex problem... Another hit for WaMu... Steinhardt shorts hedge funds... Dreman sells Citi... Getting paid for the tripe...

Here's a new reason to be wary of investing in Asia...

The preference of Asian families to have male children will eventually lead to the downfall of the economy. That's what the United Nations is arguing. Many Asians see male offspring as a type of insurance policy that will help support them in old age. In China, 120 boys were born for every 100 girls in 2005. Men are on pace to outnumber women by 23 million in India and 26 million in China by 2030.

The UN fears better technology will only increase sex selection, and leave millions of sexually repressed men with no outlet. The UN believes the societal imbalance will lead to human trafficking and prostitution, which is already on the rise.

Yet another wrinkle in the subprime mess... New York Attorney General Andrew Cuomo accused mortgage lender Washington Mutual of pressuring appraisers to inflate home values. Overpricing homes allowed Seattle-based Washington Mutual to make more and higher loans than the properties' true values would allow.

The pros were speaking up yesterday...

Hedge-fund pioneer Michael Steinhardt has come full circle. Steinhardt founded Steinhardt, Fine, Berkowitz & Co. in 1967 and produced average annualized returns of 24.5% through 1995. And that's after a 1% management fee and 15% performance fee. He obviously doesn't believe the new funds have what it takes. Steinhardt says he would take "great pleasure" in shorting the hedge-fund market.

More from value legend David Dreman... Dreman's fund held 1.4 million Citigroup shares earlier this year and had been steadily selling up to yesterday's downgrade. He owned 676,000 shares at the end of the second quarter. In a Bloomberg interview, Dreman said he wants to liquidate his entire position, but now is not the time to do it. However, Dreman's not totally down on financials. He sees some "pretty good buys" in Freddie Mac, Fannie Mae, and Washington Mutual.

Steve Sjuggerud shares the opinions of another famed investor in today's DailyWealth.

New highs: EnCana (ECA), Markel (MKL), Microsoft (MSFT), Transocean (RIG).

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"This [note about Citigroup] is about the closed thing I have seen to a BUY recommendation that I have seen in ages. The time to have sold it is when you recommended it, and the time to buy it is when you now have said to sell. And you get paid for this tripe." – Paid-up subscriber Robert Bloch

Goldsmith comment: Preservation of capital is the No. 1 rule of investing. When you have a stop in place, honor it. A lot of people lost money on Citigroup, including Eddie Lampert and David Dreman... and they get paid for their tripe as well.

"i am happy investing in simple things. the best stock i have is a coal yard
in western canada. it unloads rail cars and loads ships. it pays 8% dividends and is up from $8000 to $14000 in a year or so. i love ships, trains, trucks, pipelines. delivering the goods. I like car companies. i can understand people driving cars. i can see the growing market all over the world. I like telephone companies. utilities, especially hydro electric. water, they are not going away. I can see people all over getting phones, electricity, plumbing, for the first time. i like apartment buildings and warehouses, and office buildings. Regular income things i can grasp. i like producing mines and wells, royalty trusts, cooper, iron and coat mines. not rate earth or uranium, they tend to over hyped. i love gambling stocks, but find them dicey and slippery to get a hold of. but a small selection of these has to win. las vegas sands, growing like mad was down 27% today. buy some. just a little. agriculture stocks, food, fertilizer etc makes some sense. i can grasp cows and chickens and steaks and beans, wheat and corn, altho i would not trade commodities. food stores, too. ethanol has upset this market by using up people food for auto fuel. what a world. i have trouble with fashion. fabric, shoes, jeans, beauty. too subject to whims. i have always shied away from insurance and banks. too liable to get unlucky or lazy, everything is obscured. my experience is that the people who work there are not as smart as they would have you believe. brokers too are on this list, but maybe not ones like schwab. still i don't own any. can you imagine all these fools buying mortgages that will explode. real dumb. sheep following sheep. i have never been very succesful with tech, cause success is too mysterious to divine. i do own some techs that are both fashionable and mysterious. I expect i will get my head handed to me sooner or later. i own apple google intel and others of that ilk. i try to stay very main stream. health stocks, drugs and biotecs are also too mysterious. the lottery on who gets there drugs approved is a mystery. i own some, but i am sure i will regret it. just felt like saying these things on this down day in which the financials lead the way down and the techs almost held up. tomorrow will be different, but i think that all my companies will still be in business for years to come filling basic needs." – Paid-up subscriber George

Regards,

Sean Goldsmith
Baltimore, Maryland
November 2, 2007

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